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SFTR and new reporting obligations

SFTR and new reporting obligations
The SFTR (Securities Financing Transaction Regulation No 2015/2365 of the European Parliament of 25 November 2015) is an important part of the EU’s efforts to improve the transparency of markets in securities financing transactions and consequently of the banking sector and the broadly understood financial system. The Regulation introduces the obligation to report to authorised trade repositories with details of SFTs concluded by all market participants, including both financial and non-financial counterparties. The SFTR gives European supervisory authorities access to information about SFTs in order to improve risk monitoring tools and consequently enhance the safety of financial markets.
Examples of SFTs:
  • securities lending and borrowing,
  • repo and reverse repo transactions in securities and guaranteed rights,
  • buy-sell-back and sell-buy-back transactions in securities, commodities and guaranteed rights,
  • collateral management transactions.
It should be noted that the definition of securities financing transactions in the SFTR does not cover derivatives as defined in the EMIR (Regulation No 648/2012). However, it covers liquidity swaps and collateral swaps, which are not covered by the definition of derivatives in the EMIR.

Who will be subject to the obligation to report SFTs to authorised trade repositories?

The obligation to reports SFTs to authorised trade repositories will apply to all businesses operating in the EU, including both financial and non-financial counterparties (irrespective of their business sector), including:
  • investment firms,
  • credit institutions,
  • insurers / reinsurers,
  • UCITS (Undertakings for Collective Investment in Transferable Securities),
  • AFI (Alternative Investment Funds),
  • pension funds,
  • CCPs and CSDs.
It should be noted that were a financial counterparty enters into an SFT with a non-financial counterparty which does not exceed the limits in respect of at least two of the three criteria defined in Article 3(3) of Directive 2013/34/EU of the European Parliament and of the Council as at its balance-sheet date (in general, small and medium-sized enterprises), the financial counterparty will be responsible for reporting on behalf of both counterparties. This is key difference compared to the obligations imposed on counterparties under the EMIR.

Effective date of the new regulations
On 31 March 2017, the ESMA published final report on standards implementing the Securities Financing Transaction Regulation:Final Report - Technical standards under SFTR and certain amendments to EMIR, ESMA has sent its final draft technical standards under SFTR and the amended technical standards under EMIR for endorsement to the European Commission, which has three months to decide whether or not to endorse them.

ESMA’s final standards provide detailed provisions on:
  • SFT reporting , including the use of ISO 20022 methodology for reporting, validation and access to data;
  • data collection and availability – the use of standardised identifiers such as LEI, UTI and ISIN which should improve data quality and aggregation across TRs;
  • defined access levels for different public authorities;
  • registration and extension of registration of TRs – detailed requirements on:
    • verification of completeness and correctness of reports;
    • data availability and integrity;
    • operational separation;
    • ancillary services;
    • outsourcing;
    • IT resources; and
  • exchange of data on sanctions between authorities.

The SFTR implementing measures are expected to enter into force by the end of 2017. Firms would have to start reporting their SFTs to TRs twelve months after the publication in the Official Journal of the European Union. The reporting obligation itself will be phased-in over nine months.

KDPW’s new service: SFT trade repository
As counterparties will be required under the SFTR to report details of their transactions to trade repositories, KDPW is preparing to provide market participants with a new service enabling them to meet this obligation. KDPW has operated for more than two years as a Trade Repository under the EMIR and has the necessary experience, expertise, resources and a range of technological and procedural solutions necessary to accept and maintain trade reports. In addition, as a trade repository authorised by the ESMA under the EMIR, KDPW_TR is eligible for the fast-track authorisation procedure under the SFTR.
The complementary service offered by KDPW provides trade repository participants (both under the SFTR and under the EMIR) with major benefits including:

  • KDPW_TR’s existing communication interfaces;
  • the option of meeting both obligations by reporting to a single TR operator (to save costs and workload thanks to a single communication channel);
  • the experience and expertise of KDPW staff operating the Trade Repository;
  • professional support in the harmonisation of reporting with the SFTR standards;
  • the application of available technical and technological solutions;
  • support for SFTs settled in KDPW.

Contact with KDPW_TR:
T: +48 22 537 95 52, +48 22 537 95 72, +48 22 537 91 30
Last modified:03-04-2017 Go up