SFTR costs will mount, say participants
08 August 2016 Paris
Image: Shutterstock
Market participants have blasted the potential costs that could arise from the Securities Financing Transactions Regulation (SFTR).
The European Securities and Markets Authority (ESMA) has published responses to its initial discussion paper that set out its proposals for implementing the reporting framework under the SFTR, with the International Securities Lending Association (ISLA), Deutsche Börse Group and Amundi all making comments.
Deutsche Börse, which operates much of Europe’s clearing infrastructure, was particularly scathing of some of the finer details of ESMA’s proposals, particularly the granularity of the some of the data required.
“We see serious issues with the reporting of the prior unique trade identifier (UTI) in a novated central counterparty (CCP) transaction,” Deutsche Börse explained.
“As this needs to be issued by the bilateral counterparts and reported to the CCP it remains unclear to us what happens if no prior UTI or differing prior UTIs are reported by the bilateral counterparts. We do not think making the prior UTI a mandatory matching field for CCP novation is a good idea—this would seriously constrain the novation of bilateral transactions into central clearing.”
Deutsche Börse also sees “severe issues and huge implementation costs for CCPs and the whole market for the reporting of selective master data fields for counterparties and securities”.
“Substantial effort and additional cost is incurred with the reporting of additional data elements which are currently not available to us but remain questionable for us in term of added value.”
ISLA was similarly critical, pointing out that the content of master agreements, for example, was not viable for reporting.
“The master agreement type/master agreement version/applicable annexes/bilateral amendment data elements are not typically stored in securities lending transaction processing systems.”
“Due to the significant costs and complexities of collecting, storing and reporting this data in securities lending transaction processing systems, we believe that this information would be better monitored by means of a periodic survey rather than as part of the transaction reporting process.”
European asset manager Amundi, one of many commentators that slammed the “too short” six-week consultation window set by ESMA, insisted on “the necessity to capitalise on pre-existing data collection processes”.
“[Amundi believes] that the reference to the European Market Infrastructure Regulation (EMIR) and the use of trade repositories (that have been introduced under EMIR) in order to collect data on securities finance transactions is commendable.”
“However we are very disappointed to see that the Markets in Financial Instruments Directive/Regulation reporting obligations are considered independently of the pre-existing framework of other regulations; the fact that they have different objectives does not justify the absence of a transversal approach.”
“Amundi knows that any reporting is a matter of details and implies heavy costs; in that respect a profound and confident discussion with the industry is the best way for regulators to produce a workable framework at an acceptable cost.”
ESMA plans to publish a follow-up consultation in the second half of 2016, with the final draft rules scheduled to be sent to the European Commission for approval by 13 January 2017.
The European Securities and Markets Authority (ESMA) has published responses to its initial discussion paper that set out its proposals for implementing the reporting framework under the SFTR, with the International Securities Lending Association (ISLA), Deutsche Börse Group and Amundi all making comments.
Deutsche Börse, which operates much of Europe’s clearing infrastructure, was particularly scathing of some of the finer details of ESMA’s proposals, particularly the granularity of the some of the data required.
“We see serious issues with the reporting of the prior unique trade identifier (UTI) in a novated central counterparty (CCP) transaction,” Deutsche Börse explained.
“As this needs to be issued by the bilateral counterparts and reported to the CCP it remains unclear to us what happens if no prior UTI or differing prior UTIs are reported by the bilateral counterparts. We do not think making the prior UTI a mandatory matching field for CCP novation is a good idea—this would seriously constrain the novation of bilateral transactions into central clearing.”
Deutsche Börse also sees “severe issues and huge implementation costs for CCPs and the whole market for the reporting of selective master data fields for counterparties and securities”.
“Substantial effort and additional cost is incurred with the reporting of additional data elements which are currently not available to us but remain questionable for us in term of added value.”
ISLA was similarly critical, pointing out that the content of master agreements, for example, was not viable for reporting.
“The master agreement type/master agreement version/applicable annexes/bilateral amendment data elements are not typically stored in securities lending transaction processing systems.”
“Due to the significant costs and complexities of collecting, storing and reporting this data in securities lending transaction processing systems, we believe that this information would be better monitored by means of a periodic survey rather than as part of the transaction reporting process.”
European asset manager Amundi, one of many commentators that slammed the “too short” six-week consultation window set by ESMA, insisted on “the necessity to capitalise on pre-existing data collection processes”.
“[Amundi believes] that the reference to the European Market Infrastructure Regulation (EMIR) and the use of trade repositories (that have been introduced under EMIR) in order to collect data on securities finance transactions is commendable.”
“However we are very disappointed to see that the Markets in Financial Instruments Directive/Regulation reporting obligations are considered independently of the pre-existing framework of other regulations; the fact that they have different objectives does not justify the absence of a transversal approach.”
“Amundi knows that any reporting is a matter of details and implies heavy costs; in that respect a profound and confident discussion with the industry is the best way for regulators to produce a workable framework at an acceptable cost.”
ESMA plans to publish a follow-up consultation in the second half of 2016, with the final draft rules scheduled to be sent to the European Commission for approval by 13 January 2017.
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