ABN Amro has joined Cboe Clear Europe as an active participant on the securities financing transactions (SFT) clearing service, as the exchange group builds on its campaign to break into the traditionally bilateral activity.
The SFT service was launched in March, with ABN AMRO signing on as a borrower participant last year.
READ MORE: Cboe resurrects European central SFT clearing
Volumes on the platform have not yet been released, as the project remains in a pilot stage.
Three months after launch, Cboe Europe is planning to broaden the scope of its service, Jan Treuren, SFT product lead at the firm, told Global Trading.
“Phase one has always been European cash equities, but that was not the entire scope of Cboe’s product. We have plans to roll out fixed income, cash financing trades, and non-European equities as part of loan securities.”
Cboe Europe states that the service will allow clients to better interact with SFT-related regulation, including the Central Securities Depositories Regulation (CSDR), Securities Financing Transactions Regulation (SFTR) and Basel IV.
Treuren explained, “upcoming and already implemented regulations are looking at capital requirements, making bilateral transactions in some cases more capital intensive than cleared transactions. In a way, the regulators are incentivising the community to trade and clear via a licensed CCP, which has a reduced capital appetite.”
“[Market participants] are having to look at getting the toolkit to move through transactions with a lower risk rate.”
The firm aims both to increase efficiency and reduce risk through the service, automating much of the pre-trade process to improve the transaction process.
Treuren continued, “Cboe’s system has been designed with multi-sequential processes, so there is an order of movements taking place before the trade is opened between the lender and Cboe and Cboe and the borrower. There are four different movements taking place, and that can only be done according to sequential processes for different client types. We have made that straight through and fully automated, defined by working in close cooperation with the borrowers and lenders in working groups, reducing the operational risks.”
