Frequently asked questions
These frequently asked questions have been compiled following comments REGIS-TR has received from customers and market participants since the entry into force of SFTR on 12 January 2016.
Who is required to report?
All EU companies conducting Securities Financing Transactions (SFTs) will be required to report. This applies to both financial and non-financial companies, and includes all branches, regardless of where they are located. Examples of companies that need to report include:
- Investment firms;
- Credit institutions;
- Insurance companies;
- UCITS and AIFMs;
- Pension funds;
- CCPs and CSDs; and
Non-EU companies will also have to report Securities Financing Transactions (SFTs) undertaken by their EU branches.
Which activity needs to be reported?
In terms of the SFTs which must be reported, all of the following are in-scope:
- Repurchase transactions,
- Securities or commodities lending (borrowing),
- Sell-buy (buy-sell) back transactions,
- Margin lending transactions.
What data elements need to be reported?
In terms of the data elements which must be reported, these consist of four tables of data:
- Counterparty data – this relates to the identification of the parties who execute, report, benefit from, arrange, broker and clear the transaction;
- Loan and Collateral data – this relates to the characteristics and terms of the securities financing transaction itself, including the trading and clearing venues, interest calculations, security and commodity information, pricing and rebate details, haircuts and collateral quality;
- Margin data – this relates to initial and variation margin, and collateral posted and received against a portfolio of transactions;
- Re-use, Cash Reinvestment and Funding Sources data – this relates to collateral re-use, cash collateral reinvestment and, for margin lending transactions, funding source information.
All tables of data are differentiated across the four transaction types of: Repurchase; Buy-Sell back; Securities Lending; and Margin Lending transactions. Some data fields are mandatory for some transaction types, and not for others, depending upon the applicability of that data element to that type of transaction.
The following data standards apply:
- The same UTI (Unique Transaction Identifier) must be used by both counterparties to identify each unique transaction;
- For the identification of parties and legal entities, except where a specific exception applies, an ISO 17442 Legal Entity Identifier (LEI) must be used;
- All Securities must be identified with an ISO 6166 ISIN code and an ISO 10692 CFI code;
- Currency and Country identifiers, as well as date and time values, must all conform to the specified ISO standards;
- Many other fields must be reported using only one of the permitted values enumerated by ESMA.
How will this reporting work in practice?
Counterparties will need to report details of Securities Financing Transactions (SFTs) to an ESMA approved trade repository. They will also need to keep a record of all new SFTs that they have concluded, modified or terminated for at least five years after the termination of the contract. Details of SFTs need to be reported at the latest on the following working day, including modifications and termination of the transaction.
The reporting under SFTR shares many characteristics with EMIR reporting:
- The reporting is submitted to a trade repository registered in accordance with the SFTR regulation;
- Reporting obligations fall on both counterparties, however, delegated reporting is also possible;
- Activities to be reported are the conclusion, termination and modification of Securities Financing Transactions;
- Reporting is on a T+1 basis for all activities;
- Records must be maintained for a minimum of five years beyond the termination of the transaction;
- As a dual-sided reporting regime, where TRs detect that both sides of the trade are subject to SFTR reporting, they will enter those trades into the Inter-TR reconciliation process to ensure that the details reported by both parties match.
However, unlike EMIR, SFTR introduces some mandatory delegation aspects:
- Financial counterparties are required to report on behalf of a small non-financial counterparty (NFC);
- Fund managers are required to report on behalf of their funds (even though they have no reporting obligation themselves).
Please note: There are more differences between EMIR and SFTR.
Who will have access to the data collected by trade repositories?
RTR shall ensure its technical capability to provide direct and immediate access to details of SFTs to:
- ESMA (the European Securities and Markets Authority);
- EBA (the European Banking Authority);
- EIOPA (the European Insurance and Occupational Pensions Authority);
- ESRB (the European Systemic Risk Board);
- The competent authority supervising the trading venues of the reports transactions;
- The relevant members of the ESCB, relevant authorities of a third country in respect of which an implementing act of equivalence and recognition has been adopted;
- The supervisory authorities designated to supervise bids for the purposes of which they make or introduce;
- The relevant Union securities and market authorities whose respective supervisory responsibilities and mandates cover transactions, markets, participants and assets;
- The resolution authorities to credit institutions and investment firms; and
- The Single Resolution Board.
RTR shall ensure direct and immediate access to details of SFTs to:
- Authorities responsible for the authorisation and supervision of CCPs;
- Authorities part of the ESFS;
- Authorities responsible for the authorisation and supervision of CSDs;
- Authority responsible for the oversight of the securities settlement system operated by the CSD;
- Central Banks in the Union;
- National authorities designated to carry out the supervision of institutions for occupational retirement provision;
- Authorities responsible for the supervision of UCITS;
- National authorities empowered to supervise AIFMs and AIFs;
- Supervisory authorities of markets in financial instruments; and
- Supervisory authorities in charge of the protection of policy holders and beneficiaries of insurance and reinsurance.