The pan-European clearing house Cboe Clear Europe took part in the Eurosystem wholesale DLT settlement trials alongside ABN Amro Clearing Bank. It tested the use of wholesale central bank digital currency (wCBDC) as collateral for margin calls. Most trials by other institutions focused on securities settlement.
Currently securities trading activity continues after the EU’s TARGET payment system closes for the day. As a result, margin calls are met with US dollar commercial bank money. Hence, Cboe Clear Europe wanted to test the Euro central bank money option.
Regarding the specific functionality it tested, this included not having sufficient CBDC to meet the margin call, withdrawals, early redemptions and end of day balance redemptions.
“As Europe’s largest and most-connected pan-European clearing house, our core mission has always been to advance Europe’s post-trade landscape,” said Vikesh Patel, President, Cboe Clear Europe. “Our successful participation in the ECB’s exploratory work, alongside ABN Amro Clearing Bank N.V., demonstrates our commitment to innovation and building our understanding of new technologies such as DLT.”
If the ECB eventually introduces a wholesale CBDC, a key question will be whether it treats it the same as other central bank reserves. It would need to earn the same amount of interest to encourage the use of the CBDC outside of TARGET operating hours.
Meanwhile, participants in the DLT trials have three different settlement options. One is the CBDC system developed by the Banque de France, another is the Bundesbank’s Trigger solution and a third is the Bank of Italy’s TIPS Hash Link solution. While all three target interoperability with DLT systems, only the French one is a CBDC. The other two settle in conventional central bank money.
Cboe Clear Europe was part of the second wave of 48 participants in the ECB’s trials, joining 14 participants from the first wave.
