The European Securities and Markets Authority
("ESMA") has published its discussion paper on the reporting framework
under the Securities Financing Transactions Regulation ("SFTR").
One of the key aims of the SFTR is to increase transparency and
monitoring of securities financing transactions
("SFTs") including repo, reverse repo, stock
loans, margin loans, liquidity swaps and collateral swaps. Under
the new rules, counterparties to SFTs will be required to report
specific data fields relating to SFTs to authorised trade
repositories by T+1 in much the same way as users of derivatives
are now required to report under the European Market Infrastructure
Regulation ("EMIR"). ESMA intends to
align the SFTR reporting framework with that introduced under EMIR
where possible.
The SFTR reporting obligation will apply to both parties to an SFT
whether they are categorised as a financial or non-financial
counterparty. The reporting function may be delegated to a
counterparty or third party and, where a non-financial counterparty
trading with a financial counterparty falls below certain
thresholds, the financial counterparty is responsible for reporting
both sides of the trade. UCITS management companies and AIFMs are
responsible for reporting on behalf of, respectively, UCITS and
AIFs.
The obligation will be phased-in over a 12-21 month period,
depending on
counterparty type, after the reporting Regulatory Technical
Standards come into force (currently expected Q2 2016) and will
apply to new SFTs entered into after the relevant implementation
date (as well as historic SFTs which have more than 180 days to
run).
The discussion paper outlines ESMA's suggestions for:
i. the data fields to be included in reports to trade repositories (for various types of SFT);
ii. requirements for registration of trade repositories; and
iii. deviations from or enhancements to the EMIR reporting framework.
Market participants (including counterparties to SFTs, agent lenders, tri-party agents, regulatory authorities and trade repositories) are invited to send comments to ESMA by 22 April 2016.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
