Securities finance vendors plan to test new data tools in
the coming months as part of their efforts to aide market
participants with an onerous set of reporting rules due in
SFTR, an extensive reporting regime for securities finance
transactions (SFTs), including repo, margin loans and
securities lending, is currently being finalised by European
ESMA, Europe’s securities finance watchdog, is
expected to submit a final draft of the technical standards
next month after recent delays.
This would allow a host of vendors operating in the space to
test their current SFTR solutions ahead of deadlines which
force lenders and borrowers to report their SFTs to an approved
EU trade repository.
"We are looking to proof our solution and work through
issues with our clients as early as possible," said IHS
Markit’s Pierre Khemdoudi, speaking at an event
hosted jointly by IHS Markit and Pirum where both firms laid
out the details of their partnership to deliver an SFTR
"We expect to launch the solution shortly after the final
regulatory technical standards (RTS) draft. SFTR is a big
challenge. There are multiple areas to work on, lots to agree
on and several data points to link. The earlier we start
engagement the better placed we are to help our clients and
perfect our model."
Pirum’s Ben Challice opened the event by
providing rationale for the partnership. He explained that the
new service will combine Markit Securities
Finance’s data capabilities with Pirum's
post-trade reconciliation technology, resulting in a fully
hosted, end-to-end solution to help firms report trades".
Others in the space, such as
EquiLend, have outlined a different approach to solving
At a minimum, reporting must include the details of the
parties involved in a trade, principal amount, currency,
collateral assets, repo rate, lending fee, margin lending rate,
haircut and maturity date.
Earlier this month Jonathan Lee, EMEA regulatory reporting
manager at JP Morgan and chair of the ICMA’s SFTR
task force said the reporting requirements look "highly
prescriptive and somewhat daunting from a repo perspective." He
added that the data requirements are "less consistent with the
nuances of the securities lending and prime brokerage.
Meanwhile, ISLA’s Andy Dyson suggested that
Europe’s agent lending construct combined with
predominance of non-cash collateral in the region "compound the
difficulties" associated with SFTR. Both Lee and Dyson
called on the SFT vendor community to find streamlined and
efficient ways of taking the industry forward into the new
On Wednesday, IHS Markit’s Khemdoudi said SFTR
challenges fall into four buckets – data aggregation
and enrichment, doubled-sided reporting, building functionality
and operational resources.
He also outlined more details on IHS Markit and
Pirum’s solution. "First we will consume client
data, standardize it, create a golden copy and enrich the
information. We will then apply rule based logic to reduce the
scope of mismatching, reconcile the data, create a Unique Trade
Identifier (UTI) and report it to the trade repository."
Khemdoudi and Challice made the point that the solution is
fully hosted and already connected to tri-party agents, agent
lenders, brokers, PB’s and CCP’s with
well-established trade repository connectivity. It can also
operate as an end-to-end tool or modular solution, meaning
firms can pick and choose which parts of the SFTR reporting
process they wish to outsource.