Trade bodies call for SFTR delay in light of COVID-19 pandemic
17 March 2020 Paris
Image: Shutterstock
Firms ability to meet the Securities Financing Transactions Regulation’s (SFTR) April go-live date “has been critically compromised” and a delay is now necessary, according to two industry bodies.
The International Securities Lending Association (ISLA) and the International Capital Market Association (ICMA) have today sent a joint letter to the European Securities and Markets Authority (ESMA) requesting that the process be started to push back SFTR’s first phase implementation until October.
Due to SFTR’s implementation timetable being enshrined in EU law, the decision to allow a delay lies with the European Commission, but ESMA is able to recommend that a delay is needed on the market’s behalf.
Most recently, the EU markets watchdog exercised this power in relation to the Central Securities Depositories Regulation’s settlement discipline regime, which was re-scheduled to go live in February 2021, from September, following wide-spread market concerns and lobbying efforts from ISLA, ICMA and other industry bodies.
In their letter to the regulator, ISLA and ICMA suggest that “the impact on personnel involved in SFTR implementation programmes, compounded by pressures on firms caused by the associated surges in market volatility and volumes, has reached a point where firms believe that their capacity to ensure compliance with the requirements as of 11 April has been critically compromised”.
“In addition, firms realise that this situation will deteriorate further for some months as countries around the world implement unprecedented measures to mitigate the COVID-19 pandemic,” they add.
As a result, the trade bodies argue that “in light of such exceptional circumstances” ESMA should initiate, “as a matter of urgency, the procedure for obtaining a formal delay of the SFTR reporting go-live date to an appropriate date that falls well outside the expected critical phase of the pandemic”.
The associations’ suggested date of 11 October would align with the current deadline for the third phase of SFTR reporting, which includes buy-side members.
If a delay is not possible, the associations request that ESMA and national competent authorities “provide forbearance and sufficient reassurance” to ensure that those in-scope for the next month’s deadline will not be unduly penalised for being less than totally compliant in the first few months after go-live.
A spokesperson for ESMA tells SLT that the authority is “aware” of the market’s concerns regarding the coronavirus’ (COVID-19) impact on businesses and it is “considering with our board the appropriate measures”.
It is understood that a statement from ESMA on the matter is due in the near future.
The International Securities Lending Association (ISLA) and the International Capital Market Association (ICMA) have today sent a joint letter to the European Securities and Markets Authority (ESMA) requesting that the process be started to push back SFTR’s first phase implementation until October.
Due to SFTR’s implementation timetable being enshrined in EU law, the decision to allow a delay lies with the European Commission, but ESMA is able to recommend that a delay is needed on the market’s behalf.
Most recently, the EU markets watchdog exercised this power in relation to the Central Securities Depositories Regulation’s settlement discipline regime, which was re-scheduled to go live in February 2021, from September, following wide-spread market concerns and lobbying efforts from ISLA, ICMA and other industry bodies.
In their letter to the regulator, ISLA and ICMA suggest that “the impact on personnel involved in SFTR implementation programmes, compounded by pressures on firms caused by the associated surges in market volatility and volumes, has reached a point where firms believe that their capacity to ensure compliance with the requirements as of 11 April has been critically compromised”.
“In addition, firms realise that this situation will deteriorate further for some months as countries around the world implement unprecedented measures to mitigate the COVID-19 pandemic,” they add.
As a result, the trade bodies argue that “in light of such exceptional circumstances” ESMA should initiate, “as a matter of urgency, the procedure for obtaining a formal delay of the SFTR reporting go-live date to an appropriate date that falls well outside the expected critical phase of the pandemic”.
The associations’ suggested date of 11 October would align with the current deadline for the third phase of SFTR reporting, which includes buy-side members.
If a delay is not possible, the associations request that ESMA and national competent authorities “provide forbearance and sufficient reassurance” to ensure that those in-scope for the next month’s deadline will not be unduly penalised for being less than totally compliant in the first few months after go-live.
A spokesperson for ESMA tells SLT that the authority is “aware” of the market’s concerns regarding the coronavirus’ (COVID-19) impact on businesses and it is “considering with our board the appropriate measures”.
It is understood that a statement from ESMA on the matter is due in the near future.
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