ISLA: SFTR backloading will introduce 'practical issues'
18 June 2019 Madrid
Image: Shutterstock
At the International Securities Lending Association (ISLA) conference in Madrid, one panellist noted that in relation to the Securities Financing Transactions Regulation (SFTR), backloading is a “tricky issue” and “will introduce practical issues”.
The panellist said: “SFTR doesn’t only require new trades to be reported but also trades that are already open on the go-live date.”
They explained: “There is a six months “grace” period that the European Securities Markets Association (ESMA) has given for backloading.”
“Backloading only starts six months after go-live, which radically reduces the number of trades that need to be backloaded. That is positive but it also introduces some practical issues in particular reporting on a net exposure of a portfolio basis.”
In addition to SFTR, panellists also discussed the other upcoming regulation including the Central Securities Depositories Regulation (CSDR).
The moderator discussed the CSDR timeline and said that it has been something of a lengthy process involving lots of industry engagement.
It was indicated that there has been a delay to the CSDR deadline and that the September 2020 deadline will be delayed by a few months to a possible November date—although this has not been officially confirmed by regulators.
Another panellist said: “ESMA is taking a three stage approach to CSDR. Following the acceptance of Regulatory Technical Standards for settlement discipline, we shifted our priorities from advocacy to practical implementation so from a cash bond market perspective and also a repo market perspective.”
“We have mobilised a CSDR settlement discipline working group, which consists of traders—both cash bond and repo—and also operational experts, as well as legal and compliance representatives. It is predominantly sell side but increasingly we are seeing buy side members as well.”
“We are working on a number of things including designing a passport mechanism and we are also looking to update our buy in rules, which will be impacted by CSDR.”
Meanwhile, another panellist said that best practice is really important for driving CSDR forward and overcoming some of the settlement barriers will be a challenge.
The panellist said: “SFTR doesn’t only require new trades to be reported but also trades that are already open on the go-live date.”
They explained: “There is a six months “grace” period that the European Securities Markets Association (ESMA) has given for backloading.”
“Backloading only starts six months after go-live, which radically reduces the number of trades that need to be backloaded. That is positive but it also introduces some practical issues in particular reporting on a net exposure of a portfolio basis.”
In addition to SFTR, panellists also discussed the other upcoming regulation including the Central Securities Depositories Regulation (CSDR).
The moderator discussed the CSDR timeline and said that it has been something of a lengthy process involving lots of industry engagement.
It was indicated that there has been a delay to the CSDR deadline and that the September 2020 deadline will be delayed by a few months to a possible November date—although this has not been officially confirmed by regulators.
Another panellist said: “ESMA is taking a three stage approach to CSDR. Following the acceptance of Regulatory Technical Standards for settlement discipline, we shifted our priorities from advocacy to practical implementation so from a cash bond market perspective and also a repo market perspective.”
“We have mobilised a CSDR settlement discipline working group, which consists of traders—both cash bond and repo—and also operational experts, as well as legal and compliance representatives. It is predominantly sell side but increasingly we are seeing buy side members as well.”
“We are working on a number of things including designing a passport mechanism and we are also looking to update our buy in rules, which will be impacted by CSDR.”
Meanwhile, another panellist said that best practice is really important for driving CSDR forward and overcoming some of the settlement barriers will be a challenge.
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