Eurex Clearing is to launch a central counterparty (CCP) service for the securities lending market based on Eurex Clearing’s proven systems and industry leading risk management standards. The new service will cover European markets for loans in equities, ETFs and fixed income securities. The phased roll-out will commence in November 2011, the full scope will be available in the course of 2012.
The new CCP service for securities lending has been designed in close cooperation with key market participants. A core element of the concept is a specific member license for lending participants that enables beneficial owners to participate as clearing members of Eurex Clearing without any margin obligation whereas agent lenders can maintain their current role.
“Our innovative offering preserves the key features of the OTC market for both lending and borrowing counterparties whilst being able to deliver significant capital and operational benefits to all participants”, says Thomas Book, member of the Eurex Executive Board and responsible for clearing. “Eurex Clearing is the first clearing house to incorporate the special structure of the securities lending market into a CCP model allowing cash and non-cash collateral as well as providing automated trade flow and loan lifecycle management”.
Eurex Clearing’s new CCP service for securities lending will provide significant improvements to the current market structure. The clearing house as single counterparty to all trades will reduce counterparty risk exposure and eliminate the need for multiple credit evaluations. Thus, users can achieve a significant reduction in capital allocation associated with bilateral transactions.