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Complex SFTR falling behind schedule

12 January 2017


Delay with technical standards means overall implementation timeline will slip

Read more: SFTR reporting

SFTR, the EU’s extensive reporting regime for securities finance trades, is falling behind schedule.

A final draft of the complex regulatory technical standards not expected to enter into force in this year’s fourth quarter.

The hold-up comes after ESMA, the European regulator tasked with implementing the new regime, delayed publication of the standards until March, rather than January as planned.

This week securities lending trade body ISLA said the delay means it is "unlikely" that the final RTS would enter into force before the fourth quarter of 2017, triggering the phase-in to begin a year later.

"These expectations are based on a smooth-sailing scenario, and could well change depending on the adoption process," ISLA experts wrote in a statement.

Alexander Westphal, director at capital markets trade body ICMA, said the delay is welcome as it allows slightly more time to consult market participants.

However, he added that the set-back means that the "overall implementation timeline will slip".

Under SFTR, lenders and borrowers to report details securities finance transactions (SFTS), which include repos and stock loans.

Information on parties involved in a trade, principal amount, currency, collateral assets, repo rate, lending fee, margin lending rate, haircut and maturity date are all required.

The data will then be sent to a trade repository, giving regulators a clearer view of the market.

Several SFTR concerns were voiced at ESMA’s November meeting, including reporting of collateral re-use which is seen complex and difficult due to the enormous scale and frequency of SFTS.

In addition, the deadline for collateral reporting was erroneously indicated as taking place on Value Date +1.

According to ESMA, the correct date for collateral reporting should be on Value Date.

"In our opinion, the reporting of collateral on Value Date is challenging for the securities lending market,"  experts at ABN Amro wrote at the end of last year.

Despite a large number of remaining concerns, ESMA is eager to close off the standards without further delaying implementation, as it is already well behind the 13 January deadline mandated in the level 1 text.

ICMA’s Alexander Westphal said the organisation is "acutely aware" of the scale of the SFTR reporting challenge.

The group has been working to facilitate implementation through many of its existing work streams such as the work on trade matching and affirmation.

An ICMA kick-off event with vendors is planned in early 2017.


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