IHS Markit: ‘Time is of the essence’ for SFTR
10 July 2019 London
Image: Shutterstock
There is a growing concern that market participants are not going to be ready to report their securities finance transactions (SFTs) when regulatory obligations start next year, Stephen Grady, head of market structure at IHS Markit, has stated.
In an article for IHS Markit’s blog, Grady highlighted that the reporting trades by banks under the Securities Financing Transactions Regulation (SFTR) Article 4 commence in April next year.
While buy-side firms' direct reporting requirements do not kick off until October, levels of readiness are, for the most part, significantly lower, Grady explained.
In the article it was noted that some banks will offer a delegated reporting functionality which can reduce the preparatory efforts required for the buy side firm.
Meanwhile, oversight of on-behalf reporting remains key as the regulatory responsibility itself cannot be delegated.
Buy side firms need to ensure they can supply their counterparties with sufficient information to enable reporting, Grady advised.
According to Grady, at a bare minimum, this will be active Legal Entity Identifier codes for the contracting entity.
For firms acting on behalf of multiple underlying entities information on the end counterparty to the transaction must be made available to the bank on the other side of the trade.
Elsewhere in the article, Grady advised firms to take decisions regarding the path to compliance sooner rather than later, especially as there are just 196 working days before bank reporting requirements commence.
IHS Markit and Pirum have been developing a “state of the art” fully hosted securities finance transaction reporting solution since 2016.
System integration testing for users of the IHS Markit / Pirum solution has been underway since April.
Grady outlined that there are 40 business days before user acceptance testing (UAT) begins at the start of September, giving clients the opportunity to use the pre-production environment for six full months before the first bank trades are reported in April.
This time allows the identification of booking model practices which will need to change to avoid breaks at the trade repository.
He concluded: “There are now just eight working weeks before UAT begins for clients and given these weeks span the summer holiday period and the fact that legal contracts must be agreed (a process typically taking 2-6 weeks) before data can be onboarded (another 3-5 weeks), time is very much of the essence.”
In an article for IHS Markit’s blog, Grady highlighted that the reporting trades by banks under the Securities Financing Transactions Regulation (SFTR) Article 4 commence in April next year.
While buy-side firms' direct reporting requirements do not kick off until October, levels of readiness are, for the most part, significantly lower, Grady explained.
In the article it was noted that some banks will offer a delegated reporting functionality which can reduce the preparatory efforts required for the buy side firm.
Meanwhile, oversight of on-behalf reporting remains key as the regulatory responsibility itself cannot be delegated.
Buy side firms need to ensure they can supply their counterparties with sufficient information to enable reporting, Grady advised.
According to Grady, at a bare minimum, this will be active Legal Entity Identifier codes for the contracting entity.
For firms acting on behalf of multiple underlying entities information on the end counterparty to the transaction must be made available to the bank on the other side of the trade.
Elsewhere in the article, Grady advised firms to take decisions regarding the path to compliance sooner rather than later, especially as there are just 196 working days before bank reporting requirements commence.
IHS Markit and Pirum have been developing a “state of the art” fully hosted securities finance transaction reporting solution since 2016.
System integration testing for users of the IHS Markit / Pirum solution has been underway since April.
Grady outlined that there are 40 business days before user acceptance testing (UAT) begins at the start of September, giving clients the opportunity to use the pre-production environment for six full months before the first bank trades are reported in April.
This time allows the identification of booking model practices which will need to change to avoid breaks at the trade repository.
He concluded: “There are now just eight working weeks before UAT begins for clients and given these weeks span the summer holiday period and the fact that legal contracts must be agreed (a process typically taking 2-6 weeks) before data can be onboarded (another 3-5 weeks), time is very much of the essence.”
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