ESMA aims to increase transparency of securities lending trades in 2018
09 February 2018 Paris
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The European Securities Markets Authority (ESMA) aims to implement its new direct supervisory mandate this year, in line with the Securities Financing Transactions Regulation (SFTR), to increase the transparency of securities lending, among other securities financing transactions.
In its 2017 Annual Report and 2018 Work Programme, ESMA outlined rules for common issues across trade repositories (TRs) and credit rating agency (CRAs), as well as its plan to monitor the impact of Brexit and central counterparties (CCPs).
ESMA also aims to increase clarity of repurchase agreements, sell- and buy-back transactions and margin lending. This meets the compliance of SFTR, which requires both financial and non-financial market participants to report details of securities financing transactions to a trade repository registered or recognised by ESMA.
ESMA stated: “These details will include the relevant terms of the securities financing transactions (SFTs), the composition and characteristics of the collateral, the information on margins for cleared SFTs as well as the information on the reuse of collateral, cash reinvestment and funding sources.”
The SFTR implementing measures are expected to enter into force in H1 2018.
ESMA also concentrated on third-country (TC) (non-European) CCPs and explained that in 2018, it would monitor the potential risks TC-CCPs might introduce in the EU, and the impacts of Brexit on the TC-CCP regime.
Elsewhere in the report, ESMA said it will examine the common issues across TRs and CRAs, including issues relating to their internal control framework, cloud computing and guidelines for periodic information. It will also examine how CRA’s and TR’s will be affected by Brexit.
ESMA stated it has “continued the work that it started in 2016 on the implications of Brexit [and] made it clear to the supervised entities that the post-Brexit structure of TRs and CRAs must be as strong as the pre-Brexit structure”.
The authority also ensured that during 2018, ESMA will “continue to monitor the implementation of the Brexit plans of the supervised entities”.
It added: “ESMA expects to dedicate significant resources to Brexit, which includes the assessment of contingency plans and proposed material changes to supervised entities’ structures.”
In its 2017 Annual Report and 2018 Work Programme, ESMA outlined rules for common issues across trade repositories (TRs) and credit rating agency (CRAs), as well as its plan to monitor the impact of Brexit and central counterparties (CCPs).
ESMA also aims to increase clarity of repurchase agreements, sell- and buy-back transactions and margin lending. This meets the compliance of SFTR, which requires both financial and non-financial market participants to report details of securities financing transactions to a trade repository registered or recognised by ESMA.
ESMA stated: “These details will include the relevant terms of the securities financing transactions (SFTs), the composition and characteristics of the collateral, the information on margins for cleared SFTs as well as the information on the reuse of collateral, cash reinvestment and funding sources.”
The SFTR implementing measures are expected to enter into force in H1 2018.
ESMA also concentrated on third-country (TC) (non-European) CCPs and explained that in 2018, it would monitor the potential risks TC-CCPs might introduce in the EU, and the impacts of Brexit on the TC-CCP regime.
Elsewhere in the report, ESMA said it will examine the common issues across TRs and CRAs, including issues relating to their internal control framework, cloud computing and guidelines for periodic information. It will also examine how CRA’s and TR’s will be affected by Brexit.
ESMA stated it has “continued the work that it started in 2016 on the implications of Brexit [and] made it clear to the supervised entities that the post-Brexit structure of TRs and CRAs must be as strong as the pre-Brexit structure”.
The authority also ensured that during 2018, ESMA will “continue to monitor the implementation of the Brexit plans of the supervised entities”.
It added: “ESMA expects to dedicate significant resources to Brexit, which includes the assessment of contingency plans and proposed material changes to supervised entities’ structures.”
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