Expert stresses collaboration importance for SFTR
09 May 2019 London
Image: Shutterstock
Duncan Carpenter, head of Securities Financing Transaction Regulation (SFTR) at Pirum Systems, stressed the importance of collaboration and communication around SFTR, at an IHS Markit forum in London.
At the event, Carpenter explained that many of the industry associations already have dedicated SFTR working groups including market participants, vendors and infrastructure providers.
He noted that the European Securities Markets Authority (ESMA) is expected to publish more detailed guidance on how firms should report, and initial draft guidance is expected in May with a consultation period to follow after industry feedback.
Meanwhile, the International Capital Markets Association SFTR working group and the International Securities Lending Association SFTR working group are meeting every few weeks to discuss outstanding issues and best practice.
Carpenter detailed important things to watch out for, including the effective date for reporting
He said although clearly defined for new transactions uncertainty remains as to when some of the lifecycle events become ‘effective’ and therefore reportable.
Non-EU reporting scope is another factor to watch out for as trades ultimately booked by non-EU entities may still be reportable if an EU Branch is involved in the transaction.
According to Carpenter, the template for net collateral reporting doesn't currently accommodate for multiple parties reporting on behalf of one legal entity identifier (LEI).
Delegated reporting has similar issues, and Carpenter stated that although permitted by the regulation practical issues remain, particularly regarding the collateral reuse and reinvestment reporting, which requires a holistic view of the entities positions.
Another one to look out for is issuer LEIs, he explained that working groups highlight large volumes of issuers outside the EU do not have an LEI, and currently, this is a mandatory field for all reports
Additionally, reporting currencies should be on the radar. Carpenter affirmed that for each securities loan, the market value and the loan value of the trade are reportable.
At the event, Carpenter explained that many of the industry associations already have dedicated SFTR working groups including market participants, vendors and infrastructure providers.
He noted that the European Securities Markets Authority (ESMA) is expected to publish more detailed guidance on how firms should report, and initial draft guidance is expected in May with a consultation period to follow after industry feedback.
Meanwhile, the International Capital Markets Association SFTR working group and the International Securities Lending Association SFTR working group are meeting every few weeks to discuss outstanding issues and best practice.
Carpenter detailed important things to watch out for, including the effective date for reporting
He said although clearly defined for new transactions uncertainty remains as to when some of the lifecycle events become ‘effective’ and therefore reportable.
Non-EU reporting scope is another factor to watch out for as trades ultimately booked by non-EU entities may still be reportable if an EU Branch is involved in the transaction.
According to Carpenter, the template for net collateral reporting doesn't currently accommodate for multiple parties reporting on behalf of one legal entity identifier (LEI).
Delegated reporting has similar issues, and Carpenter stated that although permitted by the regulation practical issues remain, particularly regarding the collateral reuse and reinvestment reporting, which requires a holistic view of the entities positions.
Another one to look out for is issuer LEIs, he explained that working groups highlight large volumes of issuers outside the EU do not have an LEI, and currently, this is a mandatory field for all reports
Additionally, reporting currencies should be on the radar. Carpenter affirmed that for each securities loan, the market value and the loan value of the trade are reportable.
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