When it comes to Securities Finance Transaction Regulation (SFTR), “it is not the goal to have 100 percent pairing and matching rates, they are means of data quality”, according to Jochem Kimman, senior supervision officer, Authority for the Financial Markets Netherlands, at a Marcus Evans conference.
At the event, Kimman said this in response to an audience member who asked if there were areas in SFTR reporting that people should focus on getting 100 percent right.
He explained: “Items such as legal entity identifiers, for example, need to be looked at. Of course, matching rates must be used but it is not the intention that they to take precedence over accuracy.”
“Counterparties should not copy each other’s inaccuracies, just to make sure that they are having matching records.”
Kimman added: “We have a dual-sided reporting regime because it improves data quality if it is applied correctly. Unmatched reports should be used to identify and address the underlying causes, which could be: misreporting misinterpretation of guidelines/standards, or ambiguous standards/guidelines.”
Meanwhile, discussing where the industry is in terms of preparing for SFTR, Peter Bakos, head of division at Central Bank of Hungary, said: “One of the biggest challenges on the regulators’ side is to be able to effectively and timely use the vast amount of data/information from SFTR.”
Bakos commented: “There are institutions which are very ahead of the curve, there are a few players who are well prepared but I would say most institutions are on the less prepared side. We can help them to get to where they need to be, for example, by having a one-on-one dialogue with some players, and discuss where they are in the process and see what stage they are up to.”
Bakos added: “One of the biggest problems is the lack of clarity and potential delays, which almost acts as a punishment to those players in the market who are thinking ahead.”
Kimman noted that the regulatory technical standard has been adopted but not accepted by the commission. He said: “It is very difficult for firms to wait to implement SFTR if this is continuously postponed. At conferences, we see a lot of technical questions building up, but currently, there is no formal forum that can answer those questions.”
“In many instances, the regulation is ambiguous and in those instances, the best way to proceed is to go to the European Securities Markets Authority. Currently, there is no working group that is drafting Q&A, you cannot have guidance on rules that have not been finalised/collected.”
The moderator then asked what institutions should be doing in preparation, Kimman said: “A lot of issues can already be clarified, if you don’t know how to deal with items such as certain definitions or calculations then that is something you need to investigate and discuss with your regulator.”
An audience member then asked the panel if they were worried about regulators not being ready, in response Kimman replied: “The good thing with SFTR building on European Market Infrastructure Regulation from a regulation perspective is that we have the connections with the trade repository and the IT-infrastructure required to analyse the incoming reports.”
Kimman continued: “So from day one we will be able to look at transactions; we can start immediately with the pairing, for example, so we will see if it is being implemented correctly. And if the pairing is not happening correctly then we can investigate that.”
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