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SFTR regulatory reporting challenges

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>  Regulatory Reporting Hub: Key challenges of SFTR reporting

Key challenges 

The final RTS/ ITS pose various reporting requirements and implementation challenges on the market participants being counterparties to a SFT, which now need to be addressed within the remaining time until Go-live:

Data Availability and Consistency

  • Data universe: 153 different fields need to be sourced, with not all fields are applicable to all SFT types. 
  • Matching requirements: Majority of fields must match with other counterparties’ record with no or low tolerance levels (e.g. timestamp, UTI, market value,…) 
  • Data Sourcing: Data are dispersed across front- to backoffice systems – reliance on external parties e.g. like CCPs or trading venues

Knowledge of counterparty required

  • On-behalf reporting: Financial Counterparties are required to report on behalf of smaller Non-Financial Counterparties (“On-behalf Reporting”).
  • Management Companies (ManCos): Management Companies of AIF and UCITs are required to report on behalf of their funds (“On-behalf Reporting”).
  • Transactions with ESCB members: SFTs concluded with an ESCB entity or BIS are not reportable under SFTR, however will usually trigger a reporting obligation under Art. 26 MiFIR.

Reporting Technique 

  • Methodology: Linking of SFTs via UTI, Collateral Reporting based either on trade level or on net exposure
  • Reporting in ISO20022 format
  • Determination of correct action type for message to TR based on lifecycle of a SFT and report section – 10 action types available with 32 combinations depending on type of SFT and fields affected
  • Strict reporting timelines: Reporting by t+1 after initiation/ modification/ termination. Collateral to be reported based on EoD snapshot as soon as its allocation is known but no later than value date +1 if not known at the reporting deadline
  • Backloading requirement: Certain outstanding SFTs need to be backloaded into the TR within 190 days after the reporting start date.
  • Recordkeeping: All records need to be kept at least 5 years beyond SFT-termination.