SFTR text is published at last
09 July 2015 Brussels
Image: Shutterstock
The EU Securities Financing Transactions Regulation’s (SFTR) text has finally been released for public scrutiny.
The trialogue came to an agreement on the SFTR’s final text on 17 June in Brussels. The regulation is likely to be published in the Official Journal in the autumn and will become effective after 20 days.
The final technical rules still need to be worked out between the European Commission and the European Securities and Markets Authority (ESMA), so market participants will have between 12 and 21 months before they will be required to report to trade repositories.
Managers’ disclosures will be required 12 months from the effective date of the SFTR, while disclosures on collateral reuse must be made after six months.
The SFTR will apply to borrowers and lenders established in the EU, as well as those in a third country, if their EU branches are used during the course of a transaction.
All UCITS and alternative investment fund managers will need to comply, as those that engage in collateral reuse.
According to the SFTR’s text, the new rules require the reporting of details of transactions conducted by all market participants, whether they are financial or non-financial entities.
“[This includes] the composition of the collateral, if the collateral is available for reuse or has been reused, the substitution of collateral at the end of the day and the haircuts applied.”
The text adds that ESMA must make sure that additional operational costs are kept at a minimum: “In order to minimise additional operational costs for market participants, the new rules and standards should build on pre-existing infrastructures, operational processes and formats which have been introduced with regard to reporting derivative contracts to trade repositories.”
“In this context, ESMA should, to the extent feasible and relevant, minimise overlaps and avoid inconsistencies.”
As for collateral reuse, the text outlines what information is required and why: “In order to increase transparency of reuse, minimum information requirements should be imposed. Reuse should take place only with the express knowledge and consent of the providing counterparty.”
“Therefore, the exercise of reuse should be reflected in its securities account of the providing counterparty, unless this account is governed by the law of a third country which might provide for other appropriate means to reflect the reuse.”
The trialogue came to an agreement on the SFTR’s final text on 17 June in Brussels. The regulation is likely to be published in the Official Journal in the autumn and will become effective after 20 days.
The final technical rules still need to be worked out between the European Commission and the European Securities and Markets Authority (ESMA), so market participants will have between 12 and 21 months before they will be required to report to trade repositories.
Managers’ disclosures will be required 12 months from the effective date of the SFTR, while disclosures on collateral reuse must be made after six months.
The SFTR will apply to borrowers and lenders established in the EU, as well as those in a third country, if their EU branches are used during the course of a transaction.
All UCITS and alternative investment fund managers will need to comply, as those that engage in collateral reuse.
According to the SFTR’s text, the new rules require the reporting of details of transactions conducted by all market participants, whether they are financial or non-financial entities.
“[This includes] the composition of the collateral, if the collateral is available for reuse or has been reused, the substitution of collateral at the end of the day and the haircuts applied.”
The text adds that ESMA must make sure that additional operational costs are kept at a minimum: “In order to minimise additional operational costs for market participants, the new rules and standards should build on pre-existing infrastructures, operational processes and formats which have been introduced with regard to reporting derivative contracts to trade repositories.”
“In this context, ESMA should, to the extent feasible and relevant, minimise overlaps and avoid inconsistencies.”
As for collateral reuse, the text outlines what information is required and why: “In order to increase transparency of reuse, minimum information requirements should be imposed. Reuse should take place only with the express knowledge and consent of the providing counterparty.”
“Therefore, the exercise of reuse should be reflected in its securities account of the providing counterparty, unless this account is governed by the law of a third country which might provide for other appropriate means to reflect the reuse.”
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