Trade bodies to pen new SFTR and EMIR-compatible Master Reporting Agreement
15 August 2019 London
Image: Shutterstock
The International Securities Lending Association (ISLA) has partnered with other trade bodies to create a new Master Reporting Agreement that caters for incoming regulatory reporting requirements.
The agreement aims to address the similar ‘mandatory’ and ‘delegated’ reporting requirements for securities financing transactions (SFT) as part of the looming Securities Financing Transactions Regulation (SFTR) and derivative transactions under the European Market Infrastructure Regulation (EMIR).
Delegated reporting refers to when in-scope entities are permitted to delegate the reporting of the details of the relevant transaction while retaining regulatory responsibility for the details of that report.
Mandatory reporting includes when certain in-scope entities are required to submit reports on behalf of certain counterparties.
The project will not address other types of arrangements which are also potentially within the scope of reporting, such as margin lending by prime brokers and commodity transactions.
The International Capital Market Association, the International Swaps and Derivatives Association and the Futures Industry Association are also contributing to sculpting the new documentation framework.
The group are being advised by international law firm Linklaters, which will be responsible for penning the new agreement.
In a letter to members on the joint-project, ISLA explained that while there are differences in the reporting regimes under EMIR and SFTR, “there appear to be substantial commonalities in the way in which reporting will be delegated in practice and the concept of mandatory reporting by financial counterparties on behalf of their smaller counterparties”.
Therefore, the creation of a single agreement “would avoid the divergence of standards in different areas of the market for substantially similar reporting relationships,” ISLA concluded.
The agreement is expected to be structured in a modular way, consisting of the main body together with two or more annexes that address regulation or product-specific requirements, such as a derivatives annexe and an SFT annexe.
The initial framework is slated to be published in December, in preparation for SFTR’s implementation in 2020.
The reporting obligation under article four of SFTR for SFTs will be phased in over a nine-month period, starting from 14 April 2020 and ending 11 January 2021.
Ahead of the initial draft, the group are calling for industry guidance on preferences, guidance and feedback regarding a number of threshold questions on scope, structure, approach and process via a questionnaire that has been sent to association members. The deadline for submissions is 23 August.
The agreement aims to address the similar ‘mandatory’ and ‘delegated’ reporting requirements for securities financing transactions (SFT) as part of the looming Securities Financing Transactions Regulation (SFTR) and derivative transactions under the European Market Infrastructure Regulation (EMIR).
Delegated reporting refers to when in-scope entities are permitted to delegate the reporting of the details of the relevant transaction while retaining regulatory responsibility for the details of that report.
Mandatory reporting includes when certain in-scope entities are required to submit reports on behalf of certain counterparties.
The project will not address other types of arrangements which are also potentially within the scope of reporting, such as margin lending by prime brokers and commodity transactions.
The International Capital Market Association, the International Swaps and Derivatives Association and the Futures Industry Association are also contributing to sculpting the new documentation framework.
The group are being advised by international law firm Linklaters, which will be responsible for penning the new agreement.
In a letter to members on the joint-project, ISLA explained that while there are differences in the reporting regimes under EMIR and SFTR, “there appear to be substantial commonalities in the way in which reporting will be delegated in practice and the concept of mandatory reporting by financial counterparties on behalf of their smaller counterparties”.
Therefore, the creation of a single agreement “would avoid the divergence of standards in different areas of the market for substantially similar reporting relationships,” ISLA concluded.
The agreement is expected to be structured in a modular way, consisting of the main body together with two or more annexes that address regulation or product-specific requirements, such as a derivatives annexe and an SFT annexe.
The initial framework is slated to be published in December, in preparation for SFTR’s implementation in 2020.
The reporting obligation under article four of SFTR for SFTs will be phased in over a nine-month period, starting from 14 April 2020 and ending 11 January 2021.
Ahead of the initial draft, the group are calling for industry guidance on preferences, guidance and feedback regarding a number of threshold questions on scope, structure, approach and process via a questionnaire that has been sent to association members. The deadline for submissions is 23 August.
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