Investment firms will be required to report Securities Financing Transactions (“SFTs”) to an authorised Trade Repository (“TR”) under Article 4 of the Securities Financing Transactions Regulation (“SFTR”). This is expected to be effective from as early as Q1 2020.
Securities Financing Transactions (“SFTs”)
SFTs that fall under the scope of SFTR includes:
- A repurchase transaction;
- Securities or commodities lending and borrowing;
- A buy-sell back transaction or sell-buy back transaction; and
- A margin lending transaction.
Who is required to report and to whom?
Financial Counterparty & Non-Financial Counterparty: The SFTR has a double-sided reporting requirement, with both collateral provider and collateral taker required to report their side of the SFT to an authorised TR. However, if the transaction was entered between a financial counterparty and a non-financial counterparty, the financial counterparty is required to report for both sides.
EU based entities including their non-EU based branches: SFTR will apply to investment firms who are established in the EU including all their branches, irrespective of where they are located.
Non-EU entities where the SFT is concluded by an EU based branch:SFTR will also apply to investment firms who are established in a third country but the SFT is concluded in the course of the operations of a branch in the European Union of that counterparty.
When do reports have to be made?
Reports are required to be submitted to an authorised TR by no later than one working day after the SFT has been made (T+1).
What information needs to be reported?
The SFTR will require 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.
SFTR will also apply to outstanding trades
For the transactions that are entered on or before the reporting start date, they must be reported if they either:
(a) have a remaining maturity exceeding 180 days after the reporting start date; or
(b) have an open maturity and actually remain outstanding for 180 days after the reporting start date. In this case, the transactions must be reported within 190 days of the reporting start date.
How can TRAction assist you with the SFTR reporting?
As the reporting scope for SFTR is much wider than EMIR and MiFID II, investment firms should start preparing to establish a reporting infrastructure once the reporting start date has been officially announced.
TRAction provides the most updated news on SFTR and assists our clients to understand their reporting requirements under SFTR reporting regime.
If you would like to get further information, feel free to contact us.