Eurex pilots clearing for bilateral securities lending market
05 November 2012 | 1544 views | 0
Eurex Clearing, one of the leading CCPs globally, announced today that it will go live with Europe's first central counterparty (CCP) service for the bilateral securities lending market on 22 November.
In order to ensure a smooth and efficient market establishment, Eurex Clearing's lending CCP will commence operations with an initial group of banks and asset classes; at the start, German and Swiss blue chip equities and Exchange Traded Funds (ETFs) will be available for pilot clients. This initial phase will allow clearing members to lay the necessary foundations for the alignment of their systems and processes and extensively test the infrastructure to access this innovative CCP offering.
Building on this, the product scope will be extended to include additional European markets for loans in equities, fixed income products (such as European government bonds, corporate and covered bonds) and further ETFs.
For the market introduction, Eurex Clearing has partnered with leading securities lending and collateral management specialists. Eurex Clearing's lending CCP will combine the trading capabilities of Eurex Repo's SecLend Market and Pirum System's Real-Time service for bilaterally agreed OTC transactions with the tri-party collateral management services of Clearstream Banking Luxembourg and Euroclear Bank. The service also meets regulatory requirements such as Basel III, CRD IV and IOSCO proposals.
"Our new clearing offering for securities lending has been designed with support from key market participants who have committed to utilize the service to achieve a substantial reduction in capital allocation. We have completed testing of our offering and are ready to start a pilot phase with our early adopters," said Thomas Book, member of the Eurex Executive Board and responsible for clearing. "Our set-up will enable customers to make use of their existing connectivity to these dynamic service providers for trade and collateral management and to take the benefit of substantial improvements to the current market structure by delivering significant capital and operational benefits to all participants."
Eurex Clearing is the first clearing house to incorporate the special structure of the securities lending market into a proven and industry-accepted CCP model allowing cash and non-cash collateral as well as providing automated trade flow and loan lifecycle management. The lending CCP offers pioneering features such as a Specific Lender License that enables Beneficial Owners to participate as clearing members of Eurex Clearing without any margin obligations.
The innovative offering preserves the key features of the OTC market for both lending and borrowing counterparties such as the retention of the existing bilateral trade negotiation and relationship management aspects currently undertaken by the securities lending participants. The clearing house as single counterparty to all trades will reduce counterparty risk exposure and eliminate the need for multiple credit evaluations.