Delivering True Competition And Innovation In Europe’s Post-Trade Markets

Europe’s post-trade industry is facing a pivotal moment in its development, as market structure and regulatory changes reshape the competitive landscape and the impetus grows behind the adoption of new technologies and product innovations that can deliver even greater levels of efficiencies.

At Cboe Clear Europe, we’re excited by these shifts in the landscape, which create opportunities for us to continue to innovate, expand into new services and deliver on our vision to be Europe’s leading multi-asset clearing house. Our focus in this regard is aimed at benefitting market participants and end investors, and advancing UK and European capital markets.

We have always viewed ourselves as a ‘positive disruptor’, which thrives during times of change through a relentless focus on exceptional levels of client service, risk management and ongoing investment in client-led innovation. This remains as true now as it has ever done, as does our fundamental belief in open, competitive, and efficient pan-European market infrastructures.

There is no doubt that a competitive market structure is under threat in cash equities, as some of Europe’s national stock exchanges revert to a reliance on their own clearing provider. Such moves risk curtailing the significant progress the industry has made towards expanding access to competitive clearing, with undoubted benefits in terms of costs and other efficiencies.

These changes have simply reinforced our belief that a truly competitive clearing environment should be viewed as a key element of the EU’s efforts to revitalise its capital markets vis-à-vis other developed markets, helping to attract investors and reduce the costs of investing.

And rather than dissuade participants away from clearing choice it has focused their minds, as evidenced by the continued growth in both interoperable and preferred clearing services. The latter is used when both sides of a trade wish to use alternative CCPs, rather than the primary CCP, helping to bring about a competitive clearing environment where full interoperability does not exist. We continue to see an increasing uptake for our preferred clearing service, and now clear around

17% of volume on Euronext markets in Amsterdam, Brussels, Lisbon and Paris, and 10% on Euronext Milan.

Furthermore, we’re increasingly applying these principles beyond cash equities and into new markets, offering market participants improved capital and operational efficiencies through clearing.

We diversified into derivatives clearing in 2021 in support of Cboe Europe Derivatives (CEDX), a panEuropean equity derivatives marketplace, and will be supporting its expansion into single stock options in November 2023. Through CEDX, we are seeking to bring the same levels of positive disruption to equity derivatives, by offering participants meaningful cost savings and capital efficiencies via the ability to clear a broad range of pan-European equity derivatives at a single CCP. With the introduction of single stock options, the use of underlying stocks to provide offsets against matched equity option positions will also be available. We estimate this equates to a potential initial margin reduction for a covered call position of around 70%.

Furthermore, we also recently announced our plans to introduce a first-of-its-kind central counterparty clearing service for European Securities Financing Transactions (SFTs) in Q3 2024, subject to regulatory approvals. Cboe Clear Europe’s SFT clearing service will transform the current bilateral process between Lenders and Borrowers into a cleared model, helping to bring improved capital efficiencies, enhanced risk management and streamlined operational procedures to this important market.

These are natural extensions of our business and a clear demonstration of our commitment to innovation, partnership and collaboration to support the growth of the markets in which we operate.

Vikesh Patel President Cboe Clear Europe