SFTR stands for Securities Financing Transactions Regulation. It is a United Kingdom and European Union (EU) financial sector regulation that aims to increase the transparency of securities financing transactions (SFTs) in order to mitigate potential risks to financial stability.
Since 13 July 2020, investment firms have been required to report Securities Financing Transactions (SFTs) to an authorised Trade Repository (TR) under Article 4 of the Securities Financing Transactions Regulation (SFTR). Due to Brexit, the EU regulations have been onshored as UK SFTR under the European Union (Withdrawal) Act 2018. On this page, SFTR refers to both EU and UK SFTR versions of the regulation unless otherwise specified.
SFTs are transactions that involve the borrowing and lending of securities, such as stocks, bonds, or other financial instruments, against the collateral of cash or other securities. These transactions are commonly used by financial firms as a method of financing trades and hedging risks.
The scope of SFTR includes:
- a repurchase transaction (REPO);
- securities or commodities lending and borrowing;
- a buy-sell back transaction or sell-buy back transaction; and
- a margin lending transaction.
Who has the obligation to submit transaction reports?
|Both financial counterparties and non-financial counterparties (excluding a small non-financial counterparty (NFC-)) have reporting obligations, which cover the following:|
1. EU based entities including all its branches, irrespective of where they are located; and
2. non-EU entities where the SFT is concluded by an EU based branch.
Obligations for non-financial counterparties (except NFC-) commenced on 11 January 2021. See below the mandatory reporting obligations for NFC-s.*
|Financial counterparties which cover the following: |
1. all UK based entities; and
2. third country branches of UK based entities
have SFTR reporting obligations.
Non-financial counterparties don’t have any of these obligations.
What to report and to whom?
SFTR requires the following information to be included:
- counterparty data, including Legal Entity Identifiers (LEIs);
- loan and collateral data, including Unique Transaction Identifiers (UTIs);
- margin data; and
- reuse information.
Reports are to be submitted to an authorised Trade Repository (TRs).
Wondering where to report your transactions post-Brexit? To an EU trade repository or a UK trade repository? Click here.
When do reports have to be made?
They are required to be submitted to an authorised TR by no later than one working day after the day the SFT has been entered into (T+1).
For transactions that were entered into on or before the regulations start date, they are in scope if they either:
- have a remaining maturity exceeding 180 days after the start date; or
- have an open maturity and actually remain outstanding for 180 days after the start date. In this case, the transactions must be submitted within 190 days of the start date.
What format is required?
File submissions are required to be made to an authorised TR in ISO 20022 eXtensible Markup Language (XML) format. XML is a markup language similar to HTML, which is the most common language for building websites. XML is becoming the standard for financial information exchange and is currently or soon to be used in many other regulations like MiFiR, EMIR-Refit and SWIFT.
Mandatory delegation under EU SFTR
If a transaction is entered between a financial counterparty and a NFC-, the financial counterparty is required to report for both sides.
*A NFC- means a non-financial counterparty which does not exceed the limits of at least 2 of the 3 following criteria:
- balance sheet total – EUR 20,000,000
- net turnover – EUR 40,000,000
- average number of employees during the financial year is over 250
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