CASLA: ESMA SFTR Level III paper presents last chance for changes
31 May 2019 Toronto
Image: Shutterstock
The European Securities and Markets Authority’s (ESMA) Securities Financing Transactions Regulation (SFTR) Level III consultation paper
could present the last opportunity to make changes, a panel warned at the Canadian Securities Lending Association (CASLA) conference.
After ESMA delivered its Level III guidance on 27 May, Tamela Merriweather, senior vice president, assistant general counsel, Northern Trust, said: “SFTR is coming and this consultation paper probably presents the last opportunity to make changes, if any.”
“The consultation paper asks for comment on a number of things and seeks feedback. It also clarifies what is in scope and out of scope for SFTR.”
Merriweather noted that one of the hurdles for non-EU participants will be the need to obtain a Legal Entity Identifier (LEI).
She continued: “ESMA expects to see reporting on all securities financial transactions whether or not they’re settled, and it was disappointing to see they took this broad view of the scope of transactions to be reported.”
“In terms of key risks, I would say that it will be interesting to see what sort of access non-EU beneficial owners will want to have or continue to have to the EU markets? For so many years we have been on a path toward globalization, will we now see trends toward domestic portfolios or will beneficial owners accept the increased regulatory demands of cross-border activity?"
Another speaker posed several questions to consider: “How much risk is the reporting agent willing to assume, and how much risk are our clients willing to bear in terms of risk? And where does the liability really rest in terms of that aspect of the reporting obligation?”
However, to help with the implementation of SFTR, various companies are launching SFTR solutions to make the process a lot smoother. One panellist suggested that a critical point is going to be what this will mean for cross-border lending.
Meanwhile, one speaker noted that different regulators go down different paths in terms of getting the information they want.
The speaker explained: “The US thought the European regulators were going well overboard. We also have the other issue with Brexit. I’m not sure SFTR is going to offer any stability to the market. And it’s a huge financial resource for the technology to deal with it.”
Later in the panel, the moderator asked panellists if they thought SFTR is driving technology opportunities.
In response, Michael Norwood, associate director, EquiLend said: “The industry has to become more efficient and precise. Operational processes and reconciliations have to be done in a more timely manner because of the upcoming SFTR and CSDR rules.”
“As a result, you have to take advantage of tools today, whether it be automation or reconciliation tools. The more you take advantage of the technology, the easier it is going to be to comply with the regulatory regime that is coming.”
could present the last opportunity to make changes, a panel warned at the Canadian Securities Lending Association (CASLA) conference.
After ESMA delivered its Level III guidance on 27 May, Tamela Merriweather, senior vice president, assistant general counsel, Northern Trust, said: “SFTR is coming and this consultation paper probably presents the last opportunity to make changes, if any.”
“The consultation paper asks for comment on a number of things and seeks feedback. It also clarifies what is in scope and out of scope for SFTR.”
Merriweather noted that one of the hurdles for non-EU participants will be the need to obtain a Legal Entity Identifier (LEI).
She continued: “ESMA expects to see reporting on all securities financial transactions whether or not they’re settled, and it was disappointing to see they took this broad view of the scope of transactions to be reported.”
“In terms of key risks, I would say that it will be interesting to see what sort of access non-EU beneficial owners will want to have or continue to have to the EU markets? For so many years we have been on a path toward globalization, will we now see trends toward domestic portfolios or will beneficial owners accept the increased regulatory demands of cross-border activity?"
Another speaker posed several questions to consider: “How much risk is the reporting agent willing to assume, and how much risk are our clients willing to bear in terms of risk? And where does the liability really rest in terms of that aspect of the reporting obligation?”
However, to help with the implementation of SFTR, various companies are launching SFTR solutions to make the process a lot smoother. One panellist suggested that a critical point is going to be what this will mean for cross-border lending.
Meanwhile, one speaker noted that different regulators go down different paths in terms of getting the information they want.
The speaker explained: “The US thought the European regulators were going well overboard. We also have the other issue with Brexit. I’m not sure SFTR is going to offer any stability to the market. And it’s a huge financial resource for the technology to deal with it.”
Later in the panel, the moderator asked panellists if they thought SFTR is driving technology opportunities.
In response, Michael Norwood, associate director, EquiLend said: “The industry has to become more efficient and precise. Operational processes and reconciliations have to be done in a more timely manner because of the upcoming SFTR and CSDR rules.”
“As a result, you have to take advantage of tools today, whether it be automation or reconciliation tools. The more you take advantage of the technology, the easier it is going to be to comply with the regulatory regime that is coming.”
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