Cboe Clear Europe, working alongside ABN Amro Clearing Bank N.V., explored the use of Central Bank Digital Currency (CBDC) as collateral, with the intention of testing the viability of the solution for margin calls outside the opening hours of TARGET, the EU’s cash settlement system.

Several markets in the EU area, including many cleared by Cboe Clear Europe, support trading after the EU’s TARGET system is closed. Trading activity outside these hours may trigger higher margin requirements at CCPs, which is typically fulfilled using USD commercial bank money rather than Euro central bank money. Cboe Clear Europe was involved in testing the use of CBDC for a range of use cases in these margin call scenarios, including failures due to insufficient balance, withdrawals, early redemptions and end of day balance redemptions.

The aim of this participation was to build understanding of new technologies such as DLT and how they could be used to bring greater efficiencies to clearing and settlement. The experiments demonstrated that the use of tokenised cash collateral as a potential solution to the problem of end-of-day collateral calls if the EU do not extend the operating hours of TARGET. We are keen to explore further experiments in this space and to contribute to the further development of new industry solutions.

Vikesh Patel, President, Cboe Clear Europe, said: “As Europe’s largest and most-connected pan-European clearing house, our core mission has always been to advance Europe’s post-trade landscape. 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.”

Cboe Clear Europe was selected in June 2024 as part of a second wave of participants in the ECB’s exploratory work testing DLT.