The aim of Securities Financing Transaction Regulation (SFTR) is to reduce systemic risk to the financial markets by making trading activity more transparent.
Scope of regulation
- SFT counterparties must report repurchase, buy/sellback, sell/buyback, securities lending and margin lending transactions to a trade repository by close of business on the next working day.
- Investment funds must provide detailed disclosure on their SFTs and total return swaps.
- Parties involved in the reuse of financial instruments must meet minimum conditions, including written agreement and prior consent on the part of the collateral provider.
- The regulation applies to:
- all EU financial and non-financial counterparties
- all branches of EU counterparties, including those outside the EU
- third-country entities, if an EU branch concluded the SFT.
Entities are required to complete their SFT reports in accordance with ESMA’s Reporting Technical Standards and Implementing Technical Standards.
There are 155 reportable fields in total, split between the following tables:
Table 1: Counterparty data
Table 2: Loan and collateral data
Table 3: Margin data
Table 4: Re-use, cash reinvestment and funding sources data.
The final version of ESMA’s reporting guidelines and the definitive versions of the mandatory XML message formats are expected in Q4 2019.
The reporting start dates for firms will be introduced in phases, as below:
11 April 2020: investment and credit institutions
11 July 2020: CCPs, CSDs
11 October 2020: Insurance/reinsurance undertakings, UCITS ManCos, AIFMs, IORPs
11 January 2021: Non-financial entities.