Support for the service will be provided by Bank of America and State Street starting with its launch, which is anticipated to occur in Q3 2024, pending regulatory permissions.

With their commitment, the total number of important market participants involved in the SFT clearing service launch has reached nine, including banks, clearing firms, asset managers, and custodians. This comprises:

• Bank of America, ABN AMRO Clearing Bank, Barclays, Citibank, Goldman Sachs, and J.P. Morgan are among the borrower participants.
• Participants in the Agent Lender Program: State Street, Citibank, and BNY Mellon.

"We are delighted to have added two major participants in the European securities lending industry to the group of firms supporting the launch of the SFT service and benefit from their collective expertise as we finalize our offering," stated Vikesh Patel, President of Cboe Clear Europe. Their recent commitment, together with the caliber of the entire group of early adopters we have gathered, amply illustrates the growing necessity for central clearing to be introduced into the European SFT market in order to assist mitigate risk in this crucial sector. With the help of our partners, Cboe Clear Europe is well-positioned to offer this service, and we are thrilled to apply our demonstrated post-trade knowledge to a new asset class, resulting in substantial financial, operational, and risk-mitigation efficiencies.

Bank of America's Managing Director, Alessandro Cozzani, stated: "We are thrilled to start this adventure with Cboe Clear Europe. In our secured finance sector, creating a cleared product for securities lending makes sense and should enable better risk optimisation with counterparties.

As previously stated, matching, CCP clearing, settlement, and post-trade lifecycle management for SFT transactions in European cash equities and ETFs are anticipated to be introduced by this new service.Principal lenders, special participant lenders (UCITS and non-UCITS), and borrowers will be able to use the service, subject to regulatory approval. Settlement will occur in 19 European Central Securities Depositories (CSDs), with cash RQV coming from cash correspondent banks and non-cash RQV being managed at two Tri-Party Collateral Agents. The products are subject to significantly higher capital demands and credit risk limitations due to new regulations, such as the implementation of the Basel III endgame and Basel IV frameworks through the Capital Requirements Regulation (CRR) and Capital Requirements Directive (CRD), because European SFTs are primarily conducted on a bilateral basis and are not cleared. Such restrictions may have the effect of decreasing people's ability and willingness to lend or borrow money.

It is anticipated that Cboe Clear Europe would assist clients in addressing these new regulations, lowering their risk-weighted asset exposures related to bilateral SFTs, and promoting the expansion of this crucial sector by providing access to a CCP clearing and settlement service for SFTs. Significant operational benefits are anticipated from the service as well, such as decreased fail fines due to increased settlement efficiency, the removal of agent lender disclosures, and enhanced procedures for managing fees, corporate actions, and post-trade lifecycle processing.
 

"The addition of Bank of America and State Street demonstrates the growing momentum behind our service as we approach its launch and our commitment to delivering innovative client-driven services," stated Jan Treuren, SFT Product Lead, Cboe Clear Europe. Via a number of frequent working groups and meetings with important stakeholders, we are collaborating closely with each of our launch participants to help develop the initial part of our SFT service offering. This involves looking into extending the service's reach into new asset types and geographical areas. The only pan-European CCP providing these integrated services for SFTs in European cash equities and ETFs at launch will be Cboe Clear Europe.