SFTR - adapting to a changing landscape
03 July 2020
REGIS-TR discusses how industry collaboration has helped firms meet the challenges of SFTR, in the context of a global pandemic
Image: Chamille White/shutterstock.com
The COVID-19 disease that caused a global pandemic saw businesses having to materialise contingency plans pretty much overnight, regardless of whether these were pre-planned or not. As a trade repository (TR), we have seen a shift in how our day-to-day business is executed, experienced huge spikes in reporting volumes and explored new areas of digitalisation as a result of having to work from home for this extended period.
On top of this, and with the Securities Financing Transactions Regulation (SFTR) go-live date just around the corner, the shift in schedule as a result of altered working conditions has provided a whole new set of challenges to overcome in a short time frame.
The SFTR deadline was tight to begin with. With the final schema and validation rules only being confirmed in December and January respectively, the COVID-19 crisis only exacerbated the situation. The delay to the start of reporting was welcomed industry-wide, allowing TRs more time to develop and test their environments, and market participants time to address their immediate day-to-day operational challenges. The workload of SFTR came as a surprise to many; the sheer volume of data to be pulled together, verified and integrated, and the increase in data quality across market participants. Data quality is increasingly important, and we expect greater attention to be paid by regulators to whether SFTR, as with other regulations, is fit for purpose as we face this new uncertainty over market stability as a direct result of the pandemic.
The strong alliance across industry bodies in response to SFTR has been widely appreciated. Working in collaboration to define best practice and guidance, the International Capital and Market Authority (ICMA) and the International Securities Lending Association (ISLA) set up expert groups, bringing the European Securities and Markets Authority (ESMA) together with other regulators, TRs, market participants, infrastructure providers and vendors to analyse and develop the regulation. This has ensured a better understanding across all parties of the regulation and its practical application, allowing such issues to be addressed. A particularly valuable deliverable is the publication ICMA recommendations for reporting under SFTR. It is a freely available and actively-maintained resource, with well over 200 pages packed with expert advice on the application and best practices in complying with the regulation.
Recent discussions in the industry forums have helped to set common ground for how to report on the variation margin for a group of transactions that share the same net exposure collateral, and the use of the negative sign in some fields that are used for reconciliation. Progress is also being made on exception-handling, such as partially failed settlement and the inability to report an error of a previously reported reuse of collateral.
SFTR is specialised, complex and niche and all firms should report to a TR that can simultaneously provide both expert market knowledge and swift, responsive service support, regardless of whether we are in the office or at home.
With no known date for businesses to return to normal working life and the disparity between the easing of lockdown rules across countries, it is crucial that now, more than ever, your TR can guarantee unaffected and seamless support in unpredictable climates. We continue to guide our clients through the entire lifecycle of regulatory reporting and, while we cannot provide legal or regulatory guidance, we are committed to finding them the right person to provide technical advice.
REGIS-TR has unrivalled access to in-house securities lending, repo and collateral management expertise, afforded through our parent companies Clearstream and Iberclear and the wider Deutsche Boerse and BME groups.
Our support network offers fluency in nine languages and our proactive Client Services team maintains a response time averaging three hours to work closely with clients in solving complex issues and ensuring support remains constant.
The ability to provide timely and continuous support and responses to both clients and regulators have been in thanks to our seamless transition to fully extend our working capability to our respective homes.
We frequently stress-test our systems and reach out to clients directly if our monitoring tools detect an unexpected change in reporting patterns and our relationship managers, who are dedicated to assisting clients with all aspects of our regulatory services, also hold regular user groups throughout Europe to discuss current issues and regulatory developments.
The forced remote access and further digitalisation caused by the pandemic has allowed us to explore hosting user groups online to provide digital support.
With events playing a considerable role in our day-to-day business, we have been participating in webinars in place of planned events. These have welcomed attendees of the same, if not greater, scale as a live conference would, and we look forward to the continuation and development of this. In future, we expect to see a shift away from international travel for business meetings and events, to be replaced by a rise in digitally hosted alternatives. This is not to undermine the power of meeting industry co-workers and clients face-to-face, but instead, we expect to find more of a balance going forward.
It is easy to see the continuation of the adapted business-as-usual activities throughout and beyond this pandemic, but developing new regulations and addressing the resultant problem solving have been more challenging. With the backdrop of additional regulatory change, such as the European Market Infrastructure Regulation (EMIR) Refit and Brexit, we see an increasing need to work closely with clients, providing specialist support and guidance.
At REGIS-TR, our first move after we settled into home office was to find a solution to the cancellation of our meetings, events, and general interaction with our clients. The social distancing does not allow us to have the more casual discussions with our peers in person, and this aspect of building relationships is easily lost in more formal meetings or professional webinars.
To combat this, we have enjoyed releasing a weekly podcast called The REGIS-TR Round-Up, providing topical updates surrounding the trade repository and regulatory reporting environment, and discussions with both internal and external industry experts. The more informal format of these short podcasts allows us to reach our peers on popular platforms and mimic these discussions that could easily be lost in the remote professionalism. We welcome you to listen in and join our increasing list of subscribers.
On top of this, and with the Securities Financing Transactions Regulation (SFTR) go-live date just around the corner, the shift in schedule as a result of altered working conditions has provided a whole new set of challenges to overcome in a short time frame.
The SFTR deadline was tight to begin with. With the final schema and validation rules only being confirmed in December and January respectively, the COVID-19 crisis only exacerbated the situation. The delay to the start of reporting was welcomed industry-wide, allowing TRs more time to develop and test their environments, and market participants time to address their immediate day-to-day operational challenges. The workload of SFTR came as a surprise to many; the sheer volume of data to be pulled together, verified and integrated, and the increase in data quality across market participants. Data quality is increasingly important, and we expect greater attention to be paid by regulators to whether SFTR, as with other regulations, is fit for purpose as we face this new uncertainty over market stability as a direct result of the pandemic.
The strong alliance across industry bodies in response to SFTR has been widely appreciated. Working in collaboration to define best practice and guidance, the International Capital and Market Authority (ICMA) and the International Securities Lending Association (ISLA) set up expert groups, bringing the European Securities and Markets Authority (ESMA) together with other regulators, TRs, market participants, infrastructure providers and vendors to analyse and develop the regulation. This has ensured a better understanding across all parties of the regulation and its practical application, allowing such issues to be addressed. A particularly valuable deliverable is the publication ICMA recommendations for reporting under SFTR. It is a freely available and actively-maintained resource, with well over 200 pages packed with expert advice on the application and best practices in complying with the regulation.
Recent discussions in the industry forums have helped to set common ground for how to report on the variation margin for a group of transactions that share the same net exposure collateral, and the use of the negative sign in some fields that are used for reconciliation. Progress is also being made on exception-handling, such as partially failed settlement and the inability to report an error of a previously reported reuse of collateral.
SFTR is specialised, complex and niche and all firms should report to a TR that can simultaneously provide both expert market knowledge and swift, responsive service support, regardless of whether we are in the office or at home.
With no known date for businesses to return to normal working life and the disparity between the easing of lockdown rules across countries, it is crucial that now, more than ever, your TR can guarantee unaffected and seamless support in unpredictable climates. We continue to guide our clients through the entire lifecycle of regulatory reporting and, while we cannot provide legal or regulatory guidance, we are committed to finding them the right person to provide technical advice.
REGIS-TR has unrivalled access to in-house securities lending, repo and collateral management expertise, afforded through our parent companies Clearstream and Iberclear and the wider Deutsche Boerse and BME groups.
Our support network offers fluency in nine languages and our proactive Client Services team maintains a response time averaging three hours to work closely with clients in solving complex issues and ensuring support remains constant.
The ability to provide timely and continuous support and responses to both clients and regulators have been in thanks to our seamless transition to fully extend our working capability to our respective homes.
We frequently stress-test our systems and reach out to clients directly if our monitoring tools detect an unexpected change in reporting patterns and our relationship managers, who are dedicated to assisting clients with all aspects of our regulatory services, also hold regular user groups throughout Europe to discuss current issues and regulatory developments.
The forced remote access and further digitalisation caused by the pandemic has allowed us to explore hosting user groups online to provide digital support.
With events playing a considerable role in our day-to-day business, we have been participating in webinars in place of planned events. These have welcomed attendees of the same, if not greater, scale as a live conference would, and we look forward to the continuation and development of this. In future, we expect to see a shift away from international travel for business meetings and events, to be replaced by a rise in digitally hosted alternatives. This is not to undermine the power of meeting industry co-workers and clients face-to-face, but instead, we expect to find more of a balance going forward.
It is easy to see the continuation of the adapted business-as-usual activities throughout and beyond this pandemic, but developing new regulations and addressing the resultant problem solving have been more challenging. With the backdrop of additional regulatory change, such as the European Market Infrastructure Regulation (EMIR) Refit and Brexit, we see an increasing need to work closely with clients, providing specialist support and guidance.
At REGIS-TR, our first move after we settled into home office was to find a solution to the cancellation of our meetings, events, and general interaction with our clients. The social distancing does not allow us to have the more casual discussions with our peers in person, and this aspect of building relationships is easily lost in more formal meetings or professional webinars.
To combat this, we have enjoyed releasing a weekly podcast called The REGIS-TR Round-Up, providing topical updates surrounding the trade repository and regulatory reporting environment, and discussions with both internal and external industry experts. The more informal format of these short podcasts allows us to reach our peers on popular platforms and mimic these discussions that could easily be lost in the remote professionalism. We welcome you to listen in and join our increasing list of subscribers.
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