SFTR – Notification obligation for securities financing transactions

Securities Financing Transactions Regulation  

Target of the reporting obligation according to SFTR 

On 12 January 2016, Regulation 2015/2365 on the transparency of securities financing transactions and re-use and amendment of Regulation (EU) No 648/2012 entered into force. The regulation aims to provide transparency and stability, focussing shadow banking. As a result, risks can be detected and monitored at an early stage. The obligation to report under SFTR aggravates the transparency requirements for asset managers, which came into effect in 2017, and the rules for the re-use of collateral from 2016.

The European Commission approved the final draft of the Regulatory Technical Standards (RTS) on 13 December 2018. On 22 March, the RTS and ITS were published in the EU Journal and thus entered into force on 11 April 2019.

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German

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English

Impact of SFTR reporting requirements   

Counterparties

Notified are financial and non-financial EU-based counterparties or counterparties that conduct business through an EU-based subsidiary:

 

  • Investment firms / credit institutions
  • Central Counterparties (CCPs) and Central Securities Departments (CSDs)
  • Insurance, reinsurance, occupational pensions / UCITS / AIF
  • Non-financial counterparties

Transaction agreement

  • Repo (repurchase agreements)
  • Buy / sell-back (buy / sell) or sell / buy-back (buy / sell)
  • Securities and commodities lending transactions
  • Margin lending transactions

 

All lifecycle events of these transactions could be affected.

Data Categories


  • Counterparty data 
    Depending on the product, up to 18 data fields
  • Credit information and security exchange
    Depending on the product, up to 99 data fields
  • Data on financial security (margin)
    Depending on the product, up to 20 data fields
  • Data for reuse of collateral
    Depending on the product, up to 18 data fields

As things stand, repurchase agreements are 112, buy-backs or sell-backs 95, securities or commodities lending 130 and 64 data fields.

Timeline of Realisation   

From the date of entry into force of the RTS, credit and securities institutions will have 12 months to complete the requirements. Insurance, UCITS and AIFs have a longer implementation period.
Experience has shown that implementation of regulations relates to the following topics and areas of responsibility:

Data Provision

  • Completeness of the internal data and their quality
  • Data quality and scope of external parties (e.g. data providers and counterparties (tri-party agents))

Processes

  • Settlement processes of a transaction / transaction chain based on unique characteristics (UTI, LEI)
  • Complex reporting processes (for example, mandatory reporting of security lifecycle events)
Departments

  • Front Office (e.g. trade)
  • Middle Office (e.g. matching)
  • Settlement
  • Back Office (e.g. TX reporting)
  • Compliance / Legal (e.g. contract management)

Possible synergies with other regulations  

EMIR

The reporting process of SFTR is similar to the processes of EMIR reporting. In order to be able to use existing reporting infrastructures, the definition of data fields and formats is based on the existing EMIR reporting.

For example, the use of a UTI under EMIR is also used under SFTR for the linking of related securities transactions.

MiFID II

Transactions reported under SFTR may not be reported again under MiFID II.

Excluded are transactions with non-reportable counterparties under SFTR, e.g. ECB and national central banks, which must be taken into account under MiFID II. Therefore, both regulations cannot be considered separately when implementing SFTR. This could lead to adjustments for the existing MiFID II reporting.

ECB Money Market Statistics

A significant proportion of the products subject to reporting under SFTR is already reported under the ECB's Money Market Statistics (MMSR). 

Using the contents and formats available there could reduce the implementation costs for SFTR in terms of costs and time.

Why NEXGEN Business Consultants?

Analysis and inventory  

Based on years of experience in the implementation of regulatory requirements and the associated expertise, we have developed an analysis methodology that enables us to efficiently identify new requirements and implement them immediately. In addition, we are also able to perform optimizations of existing setups.

Darüber hinaus verfügen wir über umfassende Kompetenz zu europäischen Reporting-Anforderungen und vertiefte Settlement- und Produkterfahrungen.

    Project steering and controlling  

    We place our clients at the centre of our activity through our efficient, fast and solution-oriented action. Here we pay particular attention to professionalism and consistency during the realization. Successfully carried out projects, high expertise and targeted training of our consultants are our basis to successfully complete projects in a structured and transparent manner.

      High quality and sustainability  

      We operate in a highly professional market environment in which we convince our clients through sustainable competence, continuous willingness to change and high service quality. Our quality standards ensure the highest level of service quality. We not only want to satisfy our clients, but to inspire them in the long term.

        Sladjan Seferovic

        Managing Partner

        Tel.: +49 179 948 876 57
        E-Mail: sladjan.seferovic@nexgenbc.com

        Trinh Kersting

        Manager

        Tel.: +49 151 202 894 39
        E-Mail: trinh.kersting@nexgenbc.com

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        Download SFTR PDF
        German

        Download SFTR PDF
        English

        Disclaimer   

        The greatest care has been taken in the preparation of the content, but changes, errors and omissions are reserved. The statements made are based on judgments, historical data and legal assessments at the time of preparation of the content. All information is given without guarantee for the correctness and completeness of the content. The transfer of the content is only for the internal use of the recipient. The treatment does not constitute any legal or investment advice. This must be done individually taking into account the circumstances of the individual case.