RMA: Intraday reporting could prove difficult under SFTR
10 October 2018 Miami
Image: Shutterstock
Under the Securities Finance Transactions Regulation (SFTR), end of day reporting will be manageable, but intraday reporting could prove difficult, according to speakers at the 35th Risk Management Association Conference on Securities Lending.
One panellist said many things can happen throughout the lifecycle of a trade and all of these issues will have to be reported.
These concerns will “drive volume” under the reporting obligation.
Another panellist remarked on the problems that may arise from reporting on a trade that never actually happened. To avoid this, panellists said it would be important to develop ground rules for the regulation.
Industry bodies will need to develop these ground rules soon to ensure firms are prepared for SFTR, and a speaker said that they would like to see the rules adopted because “nothing will clarify the industry’s response like a deadline”.
Panellists said this was a “tall order” for associations and industry bodies, such as the International Securities Lending Association, which is currently working on guidelines.
“I think at this point we all agree we aren’t going to get more clarifications from the regulations. It’s on the industry to band together and has a consistent approach”, another panellist remarked.
Another concern raised on the panel was the issue of fees for firm’s using trade repositories (TR).
One speaker who represented a TR said that, first and foremost, it is the “industry that needs to be taken care of”.
The speaker said: “There’s definitely a lot of concern in the industry on fees. We looked at the way we price under European Market Infrastructures Regulation, which is based on a trade-based UTI.”
“We questioned if this was a fair model under SFTR, but we don’t believe it is. We’re moving to a submission based pricing model, being an industry-owned organisation, we have to effectively provide for costs and a small margin.”
Panellists were also concerned about whether European regulators could amend the regulation if they were to decide that the requirement was “too much”.
While changes are possible, one panellist said it would be difficult to adjust within the first two years, due to EU regulatory constraints within the first two years of implementation.
Speakers also discussed whether, under the reporting requirements, now was a good time to begin using a central counterparty (CCP) structure.
One panellist said the CCP structure was a good idea but warned that if securities lending revenue becomes de minimis, it might result in a shift away from physical lending to synthetic lending.
Finally, panellists discussed SFTR in the context of the Automated Loan Deposit (ALD) requirements.
Speakers observed the similarities between the two reporting requirements and questioned how the SFTR would effect ALD.
One speaker said that the requirements could “co-exist in the short to medium term”, but promoted SFTR as providing a “higher degree of granularity”.
One panellist said many things can happen throughout the lifecycle of a trade and all of these issues will have to be reported.
These concerns will “drive volume” under the reporting obligation.
Another panellist remarked on the problems that may arise from reporting on a trade that never actually happened. To avoid this, panellists said it would be important to develop ground rules for the regulation.
Industry bodies will need to develop these ground rules soon to ensure firms are prepared for SFTR, and a speaker said that they would like to see the rules adopted because “nothing will clarify the industry’s response like a deadline”.
Panellists said this was a “tall order” for associations and industry bodies, such as the International Securities Lending Association, which is currently working on guidelines.
“I think at this point we all agree we aren’t going to get more clarifications from the regulations. It’s on the industry to band together and has a consistent approach”, another panellist remarked.
Another concern raised on the panel was the issue of fees for firm’s using trade repositories (TR).
One speaker who represented a TR said that, first and foremost, it is the “industry that needs to be taken care of”.
The speaker said: “There’s definitely a lot of concern in the industry on fees. We looked at the way we price under European Market Infrastructures Regulation, which is based on a trade-based UTI.”
“We questioned if this was a fair model under SFTR, but we don’t believe it is. We’re moving to a submission based pricing model, being an industry-owned organisation, we have to effectively provide for costs and a small margin.”
Panellists were also concerned about whether European regulators could amend the regulation if they were to decide that the requirement was “too much”.
While changes are possible, one panellist said it would be difficult to adjust within the first two years, due to EU regulatory constraints within the first two years of implementation.
Speakers also discussed whether, under the reporting requirements, now was a good time to begin using a central counterparty (CCP) structure.
One panellist said the CCP structure was a good idea but warned that if securities lending revenue becomes de minimis, it might result in a shift away from physical lending to synthetic lending.
Finally, panellists discussed SFTR in the context of the Automated Loan Deposit (ALD) requirements.
Speakers observed the similarities between the two reporting requirements and questioned how the SFTR would effect ALD.
One speaker said that the requirements could “co-exist in the short to medium term”, but promoted SFTR as providing a “higher degree of granularity”.
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