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SFTR Reporting Get ready now for upcoming reporting requirements

The European Regulation No. 2015/2365 on transparency of securities financing transactions and of re-use (SFTR) went into force in January 2016. Reporting requirements will be phased-in in four stages depending on counterparty classification beginning 12 months after adoption of the Level 2 delegated acts (RTS), which is currently not expected before Q3 2019.

SFTR at a glance


SFTR reporting requirements at a glance

The European Regulation No. 2015/2365 on transparency of securities financing transactions and of re-use (SFTR) intends to improve transparency on securities financing markets by introducing reporting requirements for counterparties to a securities financing transaction (SFT) into a Trade Repository (TR), similar to requirements implemented under EMIR for OTC derivatives (Art. 4 SFTR).

Affected Entities

SFTR affects all counterparties to an SFT that are established within the EU (incl. EU and 3rd country branches) as well as EU-domiciled branches of 3rd country entities:

  • Financial counterparties (FC): e.g. investment firms, credit institutions, CCPs, CSDs, (re-) insurance undertakings, AIF(M), UICTS - banks, brokers, asset managers, hedge funds, insurances, dealers
  • Non-financial counterparties (NFC): all counterparties not classified as financial counterparties

ESCB entities and BIS are exempted from reporting under SFTR.

 

SFTR Timeline

Reporting requirements will be phased-in in four stages depending on counterparty classification beginning 12 months after adoption of the Level 2 delegated acts (RTS).

What instruments are affected and need to be reported?

SFTR requires affected counterparties to report counterparty, transaction, collateral composition, margin and re-use details of

  • Repurchase agreements (‘Repos’)
  • Sell-buy back or buy-sell back transactions
  • Securities or commodities borrowing/lending transactions
  • Margin lending agreements

Other key provisions:

  • ​153 fields need to be reported, whereas not all fields are applicable to all transaction types. Reporting fields are divided into four categories:
    Counterparty data (18 fields)
    Loan and collateral data (99 fields)
    (CCP) Margin data (20 fields)
    Reuse data (16 fields)
  • Reporting requirement to affect legal counterparty to the SFT, not agent(s) or facilitator(s).
  • Reporting by t+1 after initiation/ modification/ termination. Collateral to be reported based on EoD snapshot
  • Certain outstanding SFTs need to be backloaded into the TR within 190 days after the reporting start date.
  • All records need to be kept at least 5 years beyond SFT-termination.
    Financial Counterparties are required to report on behalf of smaller Non-Financial Counterparties (“On-behalf Reporting”).
  • Reporting can be delegated to another party acc. Art. 4 (2) SFTR, however responsibility for reporting will always remain with delegating entity.
  • SFTs concluded with an ESCB entity or BIS are not reportable under SFTR, however will usually trigger a reporting obligation under Art. 26 MiFIR.

Key Challenges:

Although the final implementation details on SFTR reporting are not yet known, the industry needs to cope with additional reporting requirements and implementation challenges, such as

  • Linking of SFT’s between involved counterparties and along the lifecycle via issuance of a Unique Trade Identifier (UTI)
  • Sourcing information from various entities across the industry, e.g. tri-party collateral agents, trading venues etc.
  • Determination of correct action codes for message to TR based on lifecycle of a SFT and report section
    New
    Modification
    Error
    Correction
    Position component
    Collateral update
    Termination
    Margin update
    Collateral reuse update
    Valuation update
  • Ensure matching of large number of fields with other counterparties’ record with no or low tolerance levels (e.g. timestamp, UTI, market value,…)
  • Hence, provisions for reporting such SFTs must be available, either directly to the appropriate NCA or via an Approved Reporting Mechanism such as the Regulatory Reporting Hub 

Our Service

Key success factors in efficient SFTR reporting are inter alia same data sets to be used as the other Counterparty to avoid reconciliation breaks and human intervention, and efficient ways to monitor the status of the Transactions along the lifecyle.

Deutsche Börse Regulatory Reporting Hub intends offer to its clients a SFTR solution and complementary governance, operational management and compliance supporting features and services.

 

The SFTR solution will help our clients master their SFTR challenge by leveraging our Deutsche Boerse Groups specific assets and by way of providing a unique solution for delegated reporting:

Coverage of all SFT- Transaction types reportable under SFTR 

  • Repo
  • Securities or Commodities Lending/ Borrowing
  • Sell Buy-back or Buy Sell-backs
  • Margin Lending

Coverage of needs of all types of entities (e.g. investment firms, corporates) subject to reporting obligation

  • Wave 1: Investment Firms/ Credit institutions
  • Wave 2: CCPs/ CSDs
  • Wave 3: (Re-)Insurance undertaking, UCITS & its mgmt. company, AIF managed by AIFMs, Institution for Occupational Retirement Provision
  • Wave 4: Non-Financial Counterparties

Access models 

  • GUI for data upload, status monitoring, break analysis and reconciliation
  • Automatic data feed for data streaming and processing from submission into RRH all the way to the regulatory destination, usually a registered TR

Sourcing information from various entities across the industry, leveraging Deutsche Boerse Groups specific assets from Clearstream as Tri-Party Collateral Management Agent and from Securities Lending, Eurex Repo as Trading Venue, Eurex Clearing as CCP and Regulatory Reporting Hub’s Reference Data

By way of delegation of reporting and enrichment, reduction of reporting breaks and data provision through delegation/ enrichment of all SFTs that are

  • Executed on Eurex Repo and/ or
  • Cleared at Eurex Clearing and/ or 
    (Cleared Repo incl. GC pooling, Lending CCP)
  • Originated at Clearstream's Global Securities Financing business
    (Tri-party collateral management services, Global Liquidity Hub’ Securities Lending Products, esp. ASL plus, ASL/ T2S Fails Lending) 

Validation of submitted data for authentication, file format, regulatory , business logic and cross regulation rules, incl. identification of action codes

Reconciliation of records with other counterparty pre-TR submission to reduce breaks at TR level, to improve reporting quality and to reduce risk of sanctions

Record Production

  • Creation of SFTR records in regulatory required ISO standard format, ready for submission into TR
  • Identification of SFTs reportable under MIFIR (with ESCB entities) – those can be covered via RRH leveraging its Art. 26 Transaction reporting offering and ARM status

Provision of TR feedback for further analysis and break mitigation

Key benefits of SFTR RRH solution

Data streaming and processing from submission into RRH through validations, enrichments and data formatting all the way to the regulated Transaction Repository, such as Regis-TR

Reduced investment needs and reduction of ongoing reconciliation breaks for Eurex Repo’s, Eurex Clearing’ and GFF clients through ability to delegate reporting for all SFTs that are

  • Executed on Eurex Repo and/ or
  • Cleared at Eurex Clearing and/ or
    (Cleared Repo incl. GC pooling, Lending CCP)
  • Originated at Clearstream's Global Securities Financing business
    (Tri-party collateral management services, Global Liquidity Hub’ Securities Lending Products, esp. ASL plus, ASL/ T2S Fails Lending) 

Opportunity to unlock cross-regulation synergies between SFTR and MiFIR (SFTs against ESCB entities) by way of leveraging RRH’s Art. 26 Transaction Reporting solution (ARM), reporting into all relevant NCA’s – under EU regime.

Rely on Deutsche Börse Group’s regulatory experience as trading venue, regulated market, ARM, APA, CCP, CSD and a TR (REGIS-TR) in managing and supporting regulatory change

Coverage of multiple jurisdictions and regulations also beyond SFTR to enable the move to a One-Stop Regulatory Reporting Hub

A high-quality and reliable performance infrastructure, including audit trail

Reduction of risks (e.g. sanctions)

Competitive pricing and low implementation cost

REGISTRATION

Deutsche Börse Group’s Regulatory Reporting Hub and its industry experts are committed to help you ensure full SFTR-compliance as your partner. With SFTR as new Regulation at RRH, we will continue on the journey to our vision of a one stop shop for all regulations, enabling our clients to unlock cross-regulation synergies. With SFTR and MiFIR features integrated, the vision now comes alive. 

Therefore, we kindly asks all companies to show their interest for SFTR by registering here:

> Register 

Early adopters and design group participants may be granted admission to an early adopter incentive scheme.