SFTR – Notification obligation for securities financing transactions
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.
Impact of SFTR reporting requirements
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
- 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.
- 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
- Completeness of the internal data and their quality
- Data quality and scope of external parties (e.g. data providers and counterparties (tri-party agents))
- Settlement processes of a transaction / transaction chain based on unique characteristics (UTI, LEI)
- Complex reporting processes (for example, mandatory reporting of security lifecycle events)
- Front Office (e.g. trade)
- Middle Office (e.g. matching)
- Back Office (e.g. TX reporting)
- Compliance / Legal (e.g. contract management)
Possible synergies with other regulations
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.
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.
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.
In addition, we have extensive expertise in European reporting requirements and in in-depth settlement and product experience..
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