ICMA seconds ISLA’s call for consistent regulation
29 April 2016 Zurich
Image: Shutterstock
Clarity and consistency must be the watchwords of the European Securities Markets Authority (ESMA) when it finalises its reporting requirements under the Securities Financing Transaction Regulation (SFTR), according to the International Capital Market Association (ICMA).
Moreover, the association advised that reporting requirements must be concise and focused only on essential data that will aid greater transparency in order to avoid redundant reporting requirements.
The review come as part of a response letter by ICMA’s European Repo and Collateral Council ahead of the second draft of ESMA’s regulatory technical standards (RTS) and implementing technical standard (ITS) for SFTR reporting.
ICMA stated: “In order to avoid any ambiguities, these definitions should be explicitly set out in the SFTR technical standards. Importantly, the terminology used needs to be consistent with established market practice and the applicable legal documentation, such as the global master repurchase agreement.”
The industry’s desire for consistent definitions of terms across regulations has been echoed repeatedly by other industry bodies such as the International Securities Lending Association (ISLA), which features directly within ICMA’s response letter.
ISLA also submitted its own response letter to the Financial Stability Board’s (FSB) proposal for implementing stability measures for the ‘shadow banking’ sector, in which it highlights inconsistencies between ESMA’s and the FSB’s definition of certain aspects of the securities borrowing and lending market.
As well avoiding inconsistencies, ICMA raised concerns regarding an overlap in reporting between the SFTR and the Markets in Financial Instruments Regulation (MiFIR), stating, “while we acknowledge and welcome the explicit exemption from MiFIR reporting requirements of all transactions that will be reported under SFTR, we also note that this exemption does not extend to securities financing transactions (SFTs) that have been explicitly exempted from SFTR reporting, in particular SFTs with European System of Central Banks counterparties”.
“We strongly disagree with this approach as we believe that the SFTR provides the only appropriate framework to report SFTs and that the inclusion of the aforementioned transactions in MiFIR transaction reporting goes against the clear political decision to exempt these trades from SFTR reporting obligations.”
On reporting, ICMA also highlighted the importance of not overburdening firms with unnecessary data requirements that did not directly further ESMA’s aim on improving transparency in the market.
At the same time, ESMA should, wherever possible, request data from the trade repositories as opposed to the firm themselves in order to minimise the chance of inconsistencies or errors in reported data.
Moreover, the association advised that reporting requirements must be concise and focused only on essential data that will aid greater transparency in order to avoid redundant reporting requirements.
The review come as part of a response letter by ICMA’s European Repo and Collateral Council ahead of the second draft of ESMA’s regulatory technical standards (RTS) and implementing technical standard (ITS) for SFTR reporting.
ICMA stated: “In order to avoid any ambiguities, these definitions should be explicitly set out in the SFTR technical standards. Importantly, the terminology used needs to be consistent with established market practice and the applicable legal documentation, such as the global master repurchase agreement.”
The industry’s desire for consistent definitions of terms across regulations has been echoed repeatedly by other industry bodies such as the International Securities Lending Association (ISLA), which features directly within ICMA’s response letter.
ISLA also submitted its own response letter to the Financial Stability Board’s (FSB) proposal for implementing stability measures for the ‘shadow banking’ sector, in which it highlights inconsistencies between ESMA’s and the FSB’s definition of certain aspects of the securities borrowing and lending market.
As well avoiding inconsistencies, ICMA raised concerns regarding an overlap in reporting between the SFTR and the Markets in Financial Instruments Regulation (MiFIR), stating, “while we acknowledge and welcome the explicit exemption from MiFIR reporting requirements of all transactions that will be reported under SFTR, we also note that this exemption does not extend to securities financing transactions (SFTs) that have been explicitly exempted from SFTR reporting, in particular SFTs with European System of Central Banks counterparties”.
“We strongly disagree with this approach as we believe that the SFTR provides the only appropriate framework to report SFTs and that the inclusion of the aforementioned transactions in MiFIR transaction reporting goes against the clear political decision to exempt these trades from SFTR reporting obligations.”
On reporting, ICMA also highlighted the importance of not overburdening firms with unnecessary data requirements that did not directly further ESMA’s aim on improving transparency in the market.
At the same time, ESMA should, wherever possible, request data from the trade repositories as opposed to the firm themselves in order to minimise the chance of inconsistencies or errors in reported data.
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