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Detailed SFTR reporting requirements published

  • United Kingdom
  • Financial services and markets regulation
  • Financial institutions

07-05-2019

In this briefing we summarise the reporting requirements under the Securities Financing Transaction Regulation (“SFTR”) and the steps that in-scope entities should take to comply with them.

Background

The detailed EU reporting requirements in respect of securities financing transactions (“SFTs”) were published on 22 March 2019. The detailed are set out in various regulatory technical standards (the “RTS”). Web links to the RTS are available at the end of this briefing.

The SFTR reporting requirements were introduced in order to improve the transparency and regulatory oversight of the EU SFT market. The SFTR reporting requirements broadly track the equivalent requirements in respect of derivatives transactions under the European Market Infrastructure Regulation (“EMIR”).

Entities in scope and responsibility for reporting

The SFTR reporting requirements apply to:

1. EU entities that enter into SFTs (including all EU and non-EU branches)

2. third country entities concluding SFTs through an EU branch

In general, any in-scope entity is responsible for reporting on its own behalf. Financial counterparties must, however, report on behalf of those of its counterparties that are non-financial counterparties that fall below a specified threshold1.

The management company of a UCITS is responsible for reporting on behalf of that UCITS and the manager of an AIF is responsible for reporting on behalf of that AIF.

Delegation of reporting is permitted. An entity that reports on behalf of its counterparty will not be considered to infringe any legal or contractual restriction on disclosure of information.

SFTs in scope

The types of SFTs in scope of the requirements include:

• securities and commodities lending / borrowing transactions

• buy-sell backs / sell-buy backs

• repo transactions

• margin lending

In-scope entities will be required to report details of an SFT which is in scope if that SFT:

• is concluded after the date on which the RTS apply to the entity

• has a remaining maturity of over 180 days on the date on which the RTS apply to the entity

• is an open / rolling transaction that has been outstanding for more than 180 days on the date on which the RTS apply to the entity

Scope of report

The required data and the format of the report is prescribed by the RTS. As with EMIR, the report is tabular and must be submitted in an XML format.

Identifiers

As with EMIR, parties are required to identify relevant entities through the use of a legal entity identifier (or “LEI”). There is currently no global LEI system that identifies branches of legal entities. Such a system is, however, in development. Until a branch LEI system is finalised and considered suitable for the purposes of reporting SFTs, the ISO code of the country where the branch is located should be used to identify that branch where an SFT is concluded through a branch office of a counterparty.

Entities must submit a unique trade identifier (“UTI”) in order to identify each individual SFT. A global UTI system is being developed. Until that global UTI system is finalised and considered suitable for the purposes of reporting SFTs, a UTI agreed between counterparties must be used.

Implementation timetable

The staged implementation timetable for the reporting requirements is as follows:

Implementation date

Entity type

13 April 2020

Investment firms and credit institutions

13 July 2020

Central counterparties and central security depositaries

12 October 2020

Insurance / reinsurance firms, UCITS, AIFs and pensions schemes

11 February 2021

Non-financial counterparties

Required action

Entities in the initial phases of the SFT requirements can now begin to scope their reporting obligations and introduce measures to ensure regulatory compliant reporting of SFTs on their relevant implementation date. Such entities could also begin the process of selecting a trade repository to which to report.

Those entitles that expect their brokers, securities lending agents or investment managers to report on their behalf should clarify the position with them as soon as possible. Such entitles should ensure that any such delegation arrangements are documented under a robust contractual framework.

Web links to RTS

Delegated Regulation (EU) 2019/356 supplementing the SFTR with regard to regulatory technical standards (RTS) specifying the details of securities financing transactions (SFTs) to be reported to trade repositories.

Delegated Regulation (EU) 2019/358 supplementing the SFTR with regard to RTS on the collection, verification, aggregation, comparison and publication of data on SFTs by trade repositories.

Delegated Regulation (EU) 2019/360 supplementing the SFTR with regard to fees charged by ESMA to trade repositories.

Delegated Regulation (EU) 2019/357 supplementing the SFTR with regard to RTS on access to details of SFTs held in trade repositories.

Delegated Regulation (EU) 2019/359 supplementing Regulation the SFTR with regard to RTS specifying the details of the application for registration and extension of registration as a trade repository.

Implementing Regulation (EU) 2019/363 laying down implementing technical standards (ITS) with regard to the format and frequency of reports on the details of SFTs to trade repositories in accordance with the SFTR and amending Implementing Regulation (EU) 1247/2012 with regard to the use of reporting codes in the reporting of derivative contracts.

Implementing Regulation (EU) 2019/365 laying down ITS with regard to the procedures and forms for exchange of information on sanctions, measures and investigations in accordance with the SFTR.

Implementing Regulation (EU) 2019/364 laying down ITS with regard to the format of applications for registration and extension of registration of trade repositories in accordance with the SFTR.

How Eversheds Sutherland can assist

We can work with clients in order to scope their reporting obligations and review the documentation associated with their engagement with trade repositories.

We can also work with clients to ensure that their reporting delegation arrangements are appropriate.


1. Being a non-financial counterparty which on its balance sheet date does not exceed the limits of at least two of the three criteria laid down in Article 3(3) of Directive 2013/34/EU of the European Parliament and of the Council.

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