The purpose of EU regulations due to come into force in 2020 is less about gaining access to vast quantities of securities finance transaction data and more about driving the industry's transparency modernisation, says conference panellists.
Speaking on a panel focused on the Securities Financing Transactions Regulation (SFTR) at International Securities Lending Association's (ISLA) Post Trade event in London today, a panellist explained: “I’m a firm believer that the [EU] regulator doesn’t give a stuff about having millions of data fields.”
“That’s not the point; the point is supporting people to become transparent.”
Meanwhile, another speaker said that SFTR would bring efficiency, transparency and synergy to operational procedures, such as with reconciliation.
“Transparency will help us identify where we can focus our interests to improve processes and trading as well as create opportunities around data,” the speaker added.
Elsewhere, a third panellist said that SFTR will also bring sales opportunities.
“We talk about auto-returns based on the unique trade identifier (UTI) and benefits there and we use it as a stick to encourage borrowers,” they explained.
“From a commercial angle from an agent lender perspective, it’s another service to offer clients; another piece in our creative toolbox that an agent lender can offer, so there is a benefit from a sales perspective as well.”
In a later panel, delegates were asked whether they could be ready for the April 2020 implementation date for SFTR if the level III regulatory details were only released in December.
Of the 66 people that responded, 62 percent said “no”, 33 percent said “yes”, and 5 percent said they “did not know”.
Despite this fast-approaching cliff edge, SFTR is apparently not the biggest concern the industry faces today.
When asked in a separate poll what regulatory challenges kept them awake at night the most, only 20 percent of delegates cited the release date of SFTR level III clarifications.
A further 11 percent pointed to the new data requirements, including legal entity identifiers and UTIs, while just 3 percent said actual transaction reporting.
The poll further revealed that delegates' biggest worry was the Central Securities Depositories Regulation’s (CSDR) mandatory buy-ins and penalties (34 percent), along with related booking practices, i.e. corporate actions and booking timing, etc (31 percent).
Comparing the challenges posed by SFTR and CSDR, a panellist said: “I think it [CSDR] is a slightly different beast, it is all about prevention, and CSDR is about how much money do you want to throw at it to make those problems go away but at the same time it is not something you can work on in isolation.”
“Having a full industry collaboration is key but also internally making sure you have a full front to back view on it.”
CSDR’s settlement discipline rules, which include the mandatory buy-ins and settlement fails penalties, is due to come into effect in Q3 2020.
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