New technologies in settling transactions of the central bank: Cboe Clear Europe in Eurosystem tests

Cboe Clear Europe Participates in Eurosystem Tests on New Central Bank Transaction Settlement Technologies

Cboe Clear Europe, the largest pan-European clearing house, took part in tests conducted by the Eurosystem examining the application of new technologies in wholesale central bank transaction settlement. The experiments focused on the potential of Distributed Ledger Technology (DLT) in the financial sector.

Exploring the Use of Central Bank Digital Currency (CBDC) as Collateral

As part of the tests, Cboe Clear Europe collaborated with ABN Amro Clearing Bank N.V. to assess the possibility of using Central Bank Digital Currency (CBDC) as a form of collateral. The aim was to test the feasibility of the solution for margin calls post the closure of the TARGET cash settlement system, particularly in the context of post-TARGET trading in the EU markets.

Margin Call Scenario Testing

Cboe Clear Europe engaged in experiments concerning the use of CBDC for various margin call scenarios, such as insufficient balances, withdrawals, early redemptions, and end-of-day balance redemptions. The goal was to understand how new technologies could impact the efficiency of settlement and clearing processes in the financial sector.

Solution for End-of-Day Margin Calls Issue

The results of the experiments indicated that utilizing collateral in the form of tokenized cash could provide an effective solution to the end-of-day margin call issue, especially if the operating hours of the TARGET system are not extended in the European Union.

Upcoming Participation in Eurosystem Central Bank Tests

In June 2024, Cboe Clear Europe was selected as a participant in the second wave of Eurosystem DLT tests. Vikesh Patel, Director of Cboe Clear Europe, emphasized the company’s commitment to innovation and advancing the understanding of new technologies such as DLT.