Securities lending

Functional model

A Clearing License is required in order to participate as a Clearing Member (CM) in the Eurex Clearing Lending CCP. The license can be combined with other Clearing Licenses, for which Eurex Clearing is offering CCP services.

Market participants without a Clearing License are required to have a clearing agreement in effect with a Clearing Member.

Process flows: the securities lending model

There are different options to connect to the clearing service for securities lending and borrowing:

  • Bank /(Agent) Lender or Broker-Dealer is a Clearing Member.
  • Bank /(Agent) Lender or Broker-Dealer use a third party Clearing Member.
  • Beneficial Owner or Hedge Fund connect to a third party Clearing Member.
  • Beneficial Owner uses Specific Lender License.

Agent Lenders and Broker Dealers can opt to become a Clearing Member or participate to the clearing service through a third party Clearing Member.

Beneficial Owners have the option to use a Specific Lender License. Alternatively, they can connect to a Clearing Member which could either be their Agent Lender or another third party Clearing Member.

Specific Lender License

Within the bilateral securities lending market segment, Eurex Clearing has implemented a specific license as a dedicated form of a clearing membership for lending only market participants (Beneficial Owners). Market participants using this specific license are only entitled to clear their own business.

Lenders using the Specific Lender License do not create a risk position towards Eurex Clearing and therefore are not required to post margin nor contribute to the Clearing Fund of Eurex Clearing.

Agent Lender role

Eurex Clearing incorporates an Agent Lender role for the Lending CCP. Based on this, the Agent Lender can interact in the following ways in the clearing services:

  • The Agent Lender continues acting as agent in the loan transaction if the Beneficial Owner uses a Specific Lender License or is a full Clearing Member. This way, the Beneficial Owners can remain principal as they have a direct relationship as a restricted Clearing Member with Eurex Clearing and the Agent Lender remaining as account operator acting in its current agency role.
  • The Agent Lender can become a Clearing Member and has access to all clearing functionalities of the CCP service for securities lending.
  • The Agent Lender connects to a third party Clearing Member and has therefore no direct interaction with Eurex Clearing, only indirect interaction via a third party Clearing Member. This third party Clearing Member has a general clearing license for the securities lending service and has access to all CCP clearing functionalities.

Clearing and settlement

The full range of the operational activities required for the securities lending market is wholly integrated into our existing clearing service offering. Automated services such as re-rates, mark-to-market, corporate actions as well as lending fee/rebate calculation and settlement give the opportunity for users to benefit from an increase in operational efficiency.

For further information on the processes established for the Lending CCP i.e. connectivity options, operating requirements, trade entry deadlines and settlement cut-off times, please refer to the Eurex Clearing Lending CCP Process Manual.

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