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Securities financing transactions trade reporting



United Kingdom

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.