Derivsource

As regulatory pressures reshape European repo markets and balance sheet constraints weigh on dealers, buy-side firms are increasingly looking at clearing as a complementary part of their repo toolkit to ensure reliable access to liquidity in both daily operations and times of stress. 

At the same time, sell-side banks are pursuing balance sheet efficiency, further accelerating demand for alternative access models. Euronext already offers an indirect route through the traditional GCM model and is developing a Sponsored Access model in conjunction with dealers and buy-side participants to address the challenges in European clearing frameworks. The aim is to provide an alternative model, tailored to the buy side’s operational setup, providing benefits in collateral use, risk management and market access.

In a DerivSource Q&A with Yama Darriet, Head of OTC and Repo Expansion at Euronext, he discusses how the Sponsored Access model fits into Euronext’s broader Repo Expansion Initiative, what it means for both buy- and sell-side firms, and why it marks a step change for the European repo market.

1. Repo expansion Initiative recap: In our last conversation with your colleague Janina Marks, we talked about Euronext’s Repo Expansion Initiative. Could you explain to our readers how Sponsored Access fits into this roadmap?

Phase 1 of our Repo Expansion went live in July 2025, bringing Irish, Portuguese and Spanish government bonds into clearing alongside our historically cleared Italian government debt, as well as enhanced collateral management and optimisation features through triparty partnerships including Euroclear, and other strategic alliances to follow. 

By early October 2025, members will be able to clear French, German, Dutch and Belgium govies along European supranationals, and from November 2025 will benefit from an additional triparty partnership with Clearstream. This initial phase has been focused primarily on the sell side, broadening access for international banks and debt management offices (DMOs). 

Sponsored Access forms part of Phase 2, planned for mid-2026. This phase will go further by scaling market access through the capture of flows from a large array of trading venues, expanding liquidity solutions such as general collateral (GC) baskets, and introducing direct access for buy-side firms through the Sponsored Access model. Together, these enhancements will support a much wider range of participants in our cleared repo market.

2. Drivers: What are some market-wide changes and trends that may be driving buy-side interest in accessing cleared repo?

The bilateral market is under increasing pressure from regulatory constraints that impact dealers’ balance sheets and capital requirements. Regulatory developments globally, including the SEC’s mandatory repo clearing in the US, are reinforcing the need for cleared solutions. 

At the same time, dealers are focusing on balance sheet optimisation, while on the buy-side, collateral efficiency and access to liquidity have become strategic priorities for asset managers, hedge funds, and insurers for example.

For the buy side, priorities include reducing intermediary fees, improving liquidity, and posting and managing collateral directly with the clearing house for greater oversight of execution, clearing and settlement. Sponsored Access is particularly attractive as it offers these benefits without the burden of full membership, since the default fund contribution remains with the GCM.

3. Sponsored Access to CCP clearing: Can you briefly explain the different access routes Euronext offers, including how the Sponsored Access model is being developed?

Euronext today offers two access alternatives to repo clearing.

• The General Clearing Member (GCM) model is live today. Here, the GCM assumes full responsibility for all obligations on behalf of its client, who is not a member of the clearing house. These obligations include margins, fees, default fund contributions and default management.
• The Sponsored Access model, currently under development, introduces a different split of responsibilities. The client, the “Sponsored Member”, becomes a direct participant of the clearing house for margins and settlement. The GCM, acting as the “Sponsoring Agent”, retains responsibility for the default fund and obligations related to a default.

Euronext’s Sponsored Access model is being built with extensive client feedback and market best practices. It is designed to give buy-side firms seamless direct access to the clearing house without the burden of full membership, as the sell side continues to provide default protection. This structure enables smaller institutions to participate competitively while giving Sponsoring Agents balance sheet and capital optimisation benefits, including improvements to leverage ratio and Risk Weighted Assets (RWA).

4. Buy side: What are the benefits buy-side firms would expect to achieve in accessing a sponsored access model over other available models in Europe?

For the buy side, the advantages are significant:

• Less Initial Margin (IM) to post – For the same portfolio, IM required to be posted is expected to be less than other offerings reducing the cost of the service.
• More flexibility in choice for covering the margin calls – Flexibility to cover the margin calls (both overnight and intraday) in 100% securities. This further reduces the cost of the service as posting securities is cheaper than posting cash where the buy side relies on the payment agent to provide cash to the clearing house.
• Flexible settlement location – Euronext will offer full flexibility in settlement by providing more choices for location of settlement compared to other offerings. This will allow the buy side to maintain settlement in one location, benefiting from settlement netting and reducing costs. Together, these features translate into greater capital efficiency, improved operational integration, and access to cleared repo liquidity that was previously harder to reach.

5. Sell side: What are the benefits sell-side firms would expect to achieve in accessing a sponsored access model?

For Sponsoring Agents, Sponsored Access mitigates capital costs associated with traditional client clearing and reduces barriers to extending clearing services to a broader range of clients. It supports balance sheet efficiencies while optimising repo market risk management through real-time portfolio controls.

For Sponsoring Agents, the benefits are equally clear:

• Balance sheet efficiency – reducing capital costs, with leverage ratio relief and improved RWA compared with the traditional GCM model, which carries high capital costs for some members.
• No additional buffer requirements – avoiding extra capital burdens seen in some other structures.
• Real-time portfolio controls – risk teams can monitor and manage Sponsored Member exposures through real-time IM limits.
• Flexible settlement location – supporting netted settlement to improve balance sheet and operational management.

The model also enables banks to capture previously uncleared buy-side flows, broaden market participation by tapping into new client segments, and ultimately strengthen liquidity across the ecosystem. Together, these factors enhance risk oversight, reduce capital drag and create opportunities for deeper client engagement.

6. Euronext’s model: What are the drivers for Euronext as it develops a sponsored access model? How does this support Innovate for Growth 2027?

Our goal is not simply to replicate what exists elsewhere, but to improve the most efficient sponsored access model to clients in Europe. By designing a solution that enhances margin efficiency, eliminates unnecessary buffer requirements, and gives both sides flexibility in collateral and settlement, we are delivering tangible operational and risk benefits.

This directly supports Innovate for Growth 2027, which is focused on broadening participation, enhancing liquidity, and building a truly pan-European clearing house across fixed income and repo. Sponsored Access is the bridge that brings the buy side into that ecosystem.

7. When will these models be available, and what are the next steps for firms?

The GCM model is already live and available today for buy-side firms who want to access cleared repo through an intermediary. Sponsored Access, as part of Phase 2 of our Repo Expansion Initiative, is planned to go live in mid-2026.

Next steps depend on each firm’s role. Buy-side firms should begin assessing operational and legal requirements such as system integration, collateral management workflows and governance approvals. Selecting the right Sponsoring Agent will be a critical step.

For Sponsoring Agents, preparation should include client engagement planning, risk parameter setting and internal onboarding processes.

Euronext remains in active dialogue with regulators and market participants and will provide further clarity on implementation timelines as discussions progress. Firms that prepare strategically now will be best placed to take advantage once the model is live.

8. How does Sponsored Access play a role in the supporting the evolution of the European repo marketing in the future?

Sponsored Access is one part of Euronext’s broader multi-year Repo Expansion Initiative, which is designed to strengthen liquidity provision, enhance collateral optimisation, deliver an updated risk model for further efficiency, and provide new access models across Europe. 

Together, these developments mark a step change for the repo market: creating a more resilient, efficient, and inclusive clearing ecosystem for both the sell side and buy side as Euronext delivers on its Innovate for Growth 2027 strategy.