SFTR Diaries
18 August 2020
Market participants offer a peek behind the curtain of what the period during last months go-live was really like
Image: voinsveta/stock.adobe.com
Given the year we’ve all endured so far, there are many reasons why you, dear reader, might be reading this rather than relaxing at your preferred foreign holiday destination, but the Securities Financing Transactions Regulation (SFTR) probably isn’t one of them.
After years of hand-wringing, heated discussions at industry events and conference rooms, to say nothing of the untold hours of toil by IT development teams, SFTR’s launch day came and went without much fanfare – and not just because most people were at home. Nonetheless, it is here. Phase one and two of SFTR, which affects investment firms, credit institutions, central counterparties and central securities depositories, has initiated the largest data-collection exercise the industry has ever known. The International Capital Market Association (ICMA) has published a weekly SFTR data snapshot since go-live, which, a month on, has revealed that the number and total value of transactions have remained steady thus far.
Per week, roughly 1.5 million SFTst are being reported to trade repositories with a cash value of between €14 trillion and €16.5 million. Every week repo accounted for at least 90 percent of the total value of reported transactions, while securities lending trades made up roughly two-thirds of the total number of transactions.
Reports from those at the coalface imply that almost all reported transactions are being accepted by trade repositories TRs, while matching and reconciliation rates also appear to be far higher than prior regulations and no cause for concern. Industry participants have been clear that the three-month delay the market was gifted earlier this year contributed to this as it allowed for an extended testing period.
The below submissions offer a peek behind the curtain of what the period during go-live was really like. Many writers paint a picture of less a mad dash for the finish line and more a smooth launching of a new ship, though hopefully not that one. A few highlight some minor snags and bumps that had to be remedied in the first few days, while others immediately turned their attention to the future implementation waves on the horizon.
Without doubt challenges with SFTR remain, such as the still-clunky ISO schema and additional work to get buy-side clients up to speed in time for October, but overall the industry appears to have done itself proud.
Ron Finberg, compliance and regtech specialist, Cappitech
In the days leading up to SFTR going live, we found that our clients and internal teams were actually quite relaxed. The extension as a result of the COVID-19 pandemic gave the market the opportunity to do necessary additional testing ahead of go live. It’s possible it would not have been as seamless with the original date. In particular, at the beginning of this year we’d had some concerns regarding how firms would manage the necessary updating of product identification and collateral details in time. But with a later go-live date, all our clients were able to have a process in place for this.
Once we went live, we were pleased to see that the preparation done by us and our clients mostly held up, with nothing that could be considered completely abnormal being flagged.
There were a few wry smiles when one client realised that throughout testing they’d been providing the wrong data – swapping borrower and lender details of their repos. But once this was worked out, the fix was easily made.
Prior to the go-live, one area that we did find wasn’t as tested were client reuse reports.
This had been due to gaps in data capture and processes to account for recognising reuse between a few clients’ dealing and compliance teams. For the go-live and to account for a lack of testing, our preparations incorporated time for running reuse files first in a user acceptance testing (UAT) environment before submitting to production. This ensured we could spot any problems before submitting.
What was particularly gratifying to see is the way the market, clients, vendors and TRs have clearly matured. SFTR wasn’t our first rodeo - we’ve all seen other regulations go live - and we had a good understanding of what was needed in advance. It also meant that certainly, at go live, no one was complacent. On our side, we ensured we had plenty of specialist support available in that first week which meant that the small issues that did come up were quickly and easily corrected. We were also closely monitoring the technology we’d built, including volumes to support IHS Markit whose SFTR solution is powered by us.
This all-hands-on-deck approach is something we’ve all learnt is important, and certainly, clients appreciate the additional reassurance. While SFTR preparations were being finalised, we’ve also been extremely busy as we work to integrate new clients as a result of CME’s departure from the market. But when the time came for SFTR to go live, our attention was focused on making sure that clients’ kick off went off without a hitch.
Of course, once it was done, we celebrated with cocktails delivered to everyone’s home address! It felt like rolling out a new reporting regime is now a comfortable, well understood process but raising a glass to its success was nonetheless satisfying and well deserved.
Cheers! Until the next regulation!
Jonathan Lee, senior regulatory reporting specialist, Kaizen Reporting
Like many of our clients, we were trying to get our testing services ready for one of the most complex pieces of legislation in the last decade and as if it wasn’t difficult enough, the world goes into lockdown and offices across the globe closed.
While the go-live of SFTR will have been a huge relief for many project teams, for us it is really the beginning of the journey. This is because our services test the quality of data reported to the regulator. So while many might be popping corks, it is now full steam ahead for the team at Kaizen as we start to test the accuracy of the SFTR reports.
One question that was often asked by firms during the final stages of SFTR implementation is - have we done enough? The delivery of SFTR has been a long hard slog for everyone concerned and being one of the most complex pieces of regulation introduced in recent times, with up to 155 fields across 4 reporting tables and 10 action types, the lockdown only added to the challenge. That said in the eyes of many – ESMA included, for the initial implementation, firms have perhaps done enough.
For firms, there has been a lot of training, rules translation and interpretation of the regulation but never enough testing. The late publication of the guidelines in January only added fuel to the fire with relatively few questions answered and a number of new, quite fundamental requirements introduced that very few banks have been able to adopt in time. Therefore, it has been of critical importance to emphasise the need to document every decision made around the approach to reporting, defects and action plans.
Working with reporting counterparties, it quickly became apparent that now is not the time to rest on your laurels (much deserved summer break aside). Migrating SFTR from being a project into business as usual, writing procedures, preparing appropriate metrics, building a control framework, and establishing an error remediation process are all key to a successful marriage at the end of the honeymoon period.
What we have been seeing since the July go-live is that data quality is a major issue. If you cannot stand behind the quality of your own data, you cannot effectively challenge your counterparty when presented with reconciliation queries. Nor can you offer a credible, complete and accurate delegated reporting service when the buy-side goes live in October. Collateral reporting and the inability to match any collateral at all is in many cases a key pain point.
And this is what we at Kaizen are here to help with and why it’s full steam ahead for us now SFTR is live for the first and second cohort of firms. Our team of data analysts and regulatory experts’ hard work and endless hours in the office, and more recently at home, the endless Zoom calls that replaced a simple face-to-face chat, means that we are able to offer firms an independent-and comprehensive check of their SFTR reporting accuracy and have the confidence that they are fulfilling their reporting obligations.
Val Wotton, managing director of product development and strategy, repository and derivatives services, DTCC
Almost five weeks in and reporting of SFT continues to be successful.
Acceptance rates of transactions reported by firms has been very high; higher rates than initially achieved under prior regulations such as the European Market Infrastructure Regulation. We believe this was due to the fact that firms had more time to prepare for the regulation, following the three-month delay from April to July, and had been through prior trade reporting mandates.
Further, DTCC’s testing environment was open for firms many months before the go-live of reporting, which helped them to be as prepared as possible for implementation. In fact, our UAT environment opened to vendors in August 2019, and market participants could begin testing in October, nine months before go-live. Furthermore, DTCC opened its pre-production environment in March 2020 which gave firms extra time to prepare.
In fact, as a testament to the success of SFTR implementation, firms are now able to focus their attention on the reconciliation of transactions. In the past, with other regulations, such as EMIR, firms waited weeks to address this particular aspect of reporting due to the need to ensure the successful reporting of data to the TR.
In addition to this, based on lessons learned from other regulatory reporting mandates, DTCC has worked even more closely with clients to continually educate and inform them on the operational aspects of reporting. Through our testing environment, we have been able to adopt a much more proactive approach, identifying and addressing any technical issues that we were then able to bring to the client’s attention and resolve.
We were also able to provide our buy-side and sell-side clients with test packs to streamline their testing processes through our collaboration with Delta Capita. Lastly, earlier this year we launched Report Hub, a service which simplifies and streamlines the complex data and operational requirements of SFT reporting. As a result of these efforts, client feedback has been very positive – in our latest client survey, satisfaction rates were well above 90 percent.
In addition to our own efforts, a number of industry bodies including the International Securities Lending Association and ICMA have made significant contributions to promote best practice in helping market participants to comply with SFTR.
Notwithstanding these successes, there have been some technical challenges that the industry has faced, namely the ISO schema and technical guidelines which were issued a few months before go-live. This compressed the preparation timeline for market participants as the schema dictates how to report and any small change can significantly affect how a firm undertakes reporting. It is important that this is taken into consideration during the consultation on the EMIR Refit later this year.
Looking ahead, sell-side market participants are now turning their attention to finalising their operations to be able to support their buy-side clients who are opting for delegated reporting, with the exception of the reporting of collateral reuse which the buy side are beginning to realise can be achieved in-house. Of course, there are a large number of buy-side firms who will choose to report themselves – they too are now focusing on for the go-live in October.
Catherine Talks, product manager, SFTR, UnaVista
In the run up to the SFTR go live we observed firms increasing the amount of testing that they were undertaking. In order to support firms we set up a series of daily calls to answer questions and discuss any issues that were occurring or where known. The weekend deployment of production changes in the system went well, we had pre-run the process a number of times in the previous month when deploying code into UAT and production so the process was well tested.
On Monday we started to receive production data. The acceptance rate, was quite surprising. We were expecting a higher number of rejections in the first weeks but the acceptance rate was above 90 percent and has consistently averaged over 90 percent in the following weeks. We had a number of support measures in place and have been actively reviewing TR submission data discussing with firms where the acceptance is under 80 percent in order to assist and improve in reporting performance.
The volumes of reports in the days since go live have been increasing which is expected behaviour but feedback from the market around the TR public data is that volumes are lower than anticipated. This could be due to an array of factors; the phasing of reporting, the backloading change under COVID or perhaps other factors.
The SFTR team has worked round-the-clock to help firms prepare for go live, right through the testing cycle and into production. I think we are all quietly pleased that the first two phases of firms have gone into production so smoothly but there is still much to do assisting firms in their preparations for the October reporting phase and beyond.”
13 July will be long remembered by securities finance professionals as the go-live date for SFTR.
Jonathan Tsang, director, securities finance, IHS Markit
The date would have been 13 April, however, ESMA announced a three-month delay resulting in the July date; the delay was fortuitous in that it gave stakeholders in the reporting process additional time to integrate some last-minute changes. The go-live date did finally arrive, and the collective years of planning were put to the test.
As we approached midnight on the 13 July, the team at IHS Markit mobilised to prepare the platform to ingest its very first SFTR files. The system opened at 2am London time and the first file that was received passed without any validation errors. The opening was smooth, all clients were well prepared as they had already tested in our pre-production environment. Crucially, we had no client connectivity issues. The only surprise was that we had anticipated more volumes on the first day considering what we had experienced in pre-production.
Our colleagues at Pirum were also at the ready and the first unique transaction identifiers (UTI) were shared at 2.51am and we made our first reports to the TR shortly after 4am.
Pairing and reconciliation are the primary challenges for the reporting requirement, so the focus was to ensure the smooth loading of client data in order to run through the solution and start the pairing process. This ensured the efficiency of the UTI and data exchange and clients were able to monitor this process carefully. The legal entity identifiers (LEI) of the issuer population is another challenge, however, a new opt-in feature will allow clients to minimise its impact.
One very positive item is our client services team responses and readiness; for months ahead of go-live, the mantra was to handle any queries in UAT as if it were production. We ran a support bridge for the first 48 hours of the roll-out to monitor the system and support continuous uptime. For the second week after go-live date we saw more than a third drop in the cases, with a very high rate of same-day closure.
Since 13 July, we have received around 10 million records daily, of which 750,000 to 1 million reports are submitted to the three TR. In terms of ACK ratios we see a very high success rate above 96 percent for transactions. The collateral ACK rate is more moderate and remains a challenge for some clients but this has improved since go-live as clients continue to make good progress with data remediation.
The challenges of SFTR compliance are both the massive scale of all securities lending and repo transactions as well as the intricate detail of matching, which is why so much focus and effort was required to prepare for the go-live date. Despite the updates to the regulation and the moving target of the go-live date, the collaboration with Pirum and our clients made the roll-out go smoothly with results to match the intensity of the preparation to deliver them.
Simon Davies, SFTR business development manager, Pirum Systems
Over the past few weeks, we have seen the first live trades being submitted successfully to TR. We are very pleased with how things went overall and feedback from the industry is that we are seeing a much better state compared to EMIR at the same point. Following the start of data loading to IHS Markit, our SFTR partner, on the 13 July, we started to receive data to pair between counterparts. The pairing rates we are seeing (this is prior to TR submission) have increased steadily since go-live as firms’ bed down their submission processes and issues are identified and resolved.
The main cause of non-pairing on trade date is due to one side missing their booking. This is a combination of missing trades from counterparts, timing of the report submission, and reference data mapping (i.e. LEI set up and counterpart onboarding set up) that needs to be reviewed by firms.
Given the critical nature of this in sharing UTIs and other information, firms have been working through issues and as expected, pairing rates are improving over time.
Whilst the pairing rates are looking reasonable overall and improving, trades with a fully matching data set are much lower. This is not unexpected from the pre go-live testing results and from conversations with clients, who have generally prioritised fields that are required for TR pairing (UTI, LEIs and master agreement) and validation of data to get good ACK rates. This is certainly pragmatic, but the missed opportunity to remediate data as part of the SFTR programme delivery is likely to provide a hangover for firms now they are live.
Core economic data generally matches; however, reference, static data, and pricing / valuation data are more likely to not match. As firms settle down with their reporting, we are discussing matching fields in more detail and how firms can use automation and workflow to prevent these breaks from occurring in the first place.
There has been a huge effort across the industry, led by the industry bodies, in understanding and working through the reporting challenges. Along with IHS Markit, we are proud to have been part of that effort and have been in a unique position to help bring together this work for the benefit of so much of the industry. We look forward to continuing with this beyond the initial go-live, and helping firms understand and resolve any remaining issues whilst we collectively work to improve industry metrics. This will ensure we have a better, more efficient reporting process for securities finance than has been achieved under previous regulations.
We would like to thank everyone involved at Pirum and IHS Markit, along with our clients for their input and support to get us to this stage. The feedback we have received to date has been resoundingly positive and that the implementation has been smoother than seen with EMIR and MIFIR. Given that many of us and our clients are working from home, collective celebrations will need to wait a while, but we’re now able to take advantage of a quieter period to have a rest, recharge and get ready for phase three.
After years of hand-wringing, heated discussions at industry events and conference rooms, to say nothing of the untold hours of toil by IT development teams, SFTR’s launch day came and went without much fanfare – and not just because most people were at home. Nonetheless, it is here. Phase one and two of SFTR, which affects investment firms, credit institutions, central counterparties and central securities depositories, has initiated the largest data-collection exercise the industry has ever known. The International Capital Market Association (ICMA) has published a weekly SFTR data snapshot since go-live, which, a month on, has revealed that the number and total value of transactions have remained steady thus far.
Per week, roughly 1.5 million SFTst are being reported to trade repositories with a cash value of between €14 trillion and €16.5 million. Every week repo accounted for at least 90 percent of the total value of reported transactions, while securities lending trades made up roughly two-thirds of the total number of transactions.
Reports from those at the coalface imply that almost all reported transactions are being accepted by trade repositories TRs, while matching and reconciliation rates also appear to be far higher than prior regulations and no cause for concern. Industry participants have been clear that the three-month delay the market was gifted earlier this year contributed to this as it allowed for an extended testing period.
The below submissions offer a peek behind the curtain of what the period during go-live was really like. Many writers paint a picture of less a mad dash for the finish line and more a smooth launching of a new ship, though hopefully not that one. A few highlight some minor snags and bumps that had to be remedied in the first few days, while others immediately turned their attention to the future implementation waves on the horizon.
Without doubt challenges with SFTR remain, such as the still-clunky ISO schema and additional work to get buy-side clients up to speed in time for October, but overall the industry appears to have done itself proud.
Ron Finberg, compliance and regtech specialist, Cappitech
In the days leading up to SFTR going live, we found that our clients and internal teams were actually quite relaxed. The extension as a result of the COVID-19 pandemic gave the market the opportunity to do necessary additional testing ahead of go live. It’s possible it would not have been as seamless with the original date. In particular, at the beginning of this year we’d had some concerns regarding how firms would manage the necessary updating of product identification and collateral details in time. But with a later go-live date, all our clients were able to have a process in place for this.
Once we went live, we were pleased to see that the preparation done by us and our clients mostly held up, with nothing that could be considered completely abnormal being flagged.
There were a few wry smiles when one client realised that throughout testing they’d been providing the wrong data – swapping borrower and lender details of their repos. But once this was worked out, the fix was easily made.
Prior to the go-live, one area that we did find wasn’t as tested were client reuse reports.
This had been due to gaps in data capture and processes to account for recognising reuse between a few clients’ dealing and compliance teams. For the go-live and to account for a lack of testing, our preparations incorporated time for running reuse files first in a user acceptance testing (UAT) environment before submitting to production. This ensured we could spot any problems before submitting.
What was particularly gratifying to see is the way the market, clients, vendors and TRs have clearly matured. SFTR wasn’t our first rodeo - we’ve all seen other regulations go live - and we had a good understanding of what was needed in advance. It also meant that certainly, at go live, no one was complacent. On our side, we ensured we had plenty of specialist support available in that first week which meant that the small issues that did come up were quickly and easily corrected. We were also closely monitoring the technology we’d built, including volumes to support IHS Markit whose SFTR solution is powered by us.
This all-hands-on-deck approach is something we’ve all learnt is important, and certainly, clients appreciate the additional reassurance. While SFTR preparations were being finalised, we’ve also been extremely busy as we work to integrate new clients as a result of CME’s departure from the market. But when the time came for SFTR to go live, our attention was focused on making sure that clients’ kick off went off without a hitch.
Of course, once it was done, we celebrated with cocktails delivered to everyone’s home address! It felt like rolling out a new reporting regime is now a comfortable, well understood process but raising a glass to its success was nonetheless satisfying and well deserved.
Cheers! Until the next regulation!
Jonathan Lee, senior regulatory reporting specialist, Kaizen Reporting
Like many of our clients, we were trying to get our testing services ready for one of the most complex pieces of legislation in the last decade and as if it wasn’t difficult enough, the world goes into lockdown and offices across the globe closed.
While the go-live of SFTR will have been a huge relief for many project teams, for us it is really the beginning of the journey. This is because our services test the quality of data reported to the regulator. So while many might be popping corks, it is now full steam ahead for the team at Kaizen as we start to test the accuracy of the SFTR reports.
One question that was often asked by firms during the final stages of SFTR implementation is - have we done enough? The delivery of SFTR has been a long hard slog for everyone concerned and being one of the most complex pieces of regulation introduced in recent times, with up to 155 fields across 4 reporting tables and 10 action types, the lockdown only added to the challenge. That said in the eyes of many – ESMA included, for the initial implementation, firms have perhaps done enough.
For firms, there has been a lot of training, rules translation and interpretation of the regulation but never enough testing. The late publication of the guidelines in January only added fuel to the fire with relatively few questions answered and a number of new, quite fundamental requirements introduced that very few banks have been able to adopt in time. Therefore, it has been of critical importance to emphasise the need to document every decision made around the approach to reporting, defects and action plans.
Working with reporting counterparties, it quickly became apparent that now is not the time to rest on your laurels (much deserved summer break aside). Migrating SFTR from being a project into business as usual, writing procedures, preparing appropriate metrics, building a control framework, and establishing an error remediation process are all key to a successful marriage at the end of the honeymoon period.
What we have been seeing since the July go-live is that data quality is a major issue. If you cannot stand behind the quality of your own data, you cannot effectively challenge your counterparty when presented with reconciliation queries. Nor can you offer a credible, complete and accurate delegated reporting service when the buy-side goes live in October. Collateral reporting and the inability to match any collateral at all is in many cases a key pain point.
And this is what we at Kaizen are here to help with and why it’s full steam ahead for us now SFTR is live for the first and second cohort of firms. Our team of data analysts and regulatory experts’ hard work and endless hours in the office, and more recently at home, the endless Zoom calls that replaced a simple face-to-face chat, means that we are able to offer firms an independent-and comprehensive check of their SFTR reporting accuracy and have the confidence that they are fulfilling their reporting obligations.
Val Wotton, managing director of product development and strategy, repository and derivatives services, DTCC
Almost five weeks in and reporting of SFT continues to be successful.
Acceptance rates of transactions reported by firms has been very high; higher rates than initially achieved under prior regulations such as the European Market Infrastructure Regulation. We believe this was due to the fact that firms had more time to prepare for the regulation, following the three-month delay from April to July, and had been through prior trade reporting mandates.
Further, DTCC’s testing environment was open for firms many months before the go-live of reporting, which helped them to be as prepared as possible for implementation. In fact, our UAT environment opened to vendors in August 2019, and market participants could begin testing in October, nine months before go-live. Furthermore, DTCC opened its pre-production environment in March 2020 which gave firms extra time to prepare.
In fact, as a testament to the success of SFTR implementation, firms are now able to focus their attention on the reconciliation of transactions. In the past, with other regulations, such as EMIR, firms waited weeks to address this particular aspect of reporting due to the need to ensure the successful reporting of data to the TR.
In addition to this, based on lessons learned from other regulatory reporting mandates, DTCC has worked even more closely with clients to continually educate and inform them on the operational aspects of reporting. Through our testing environment, we have been able to adopt a much more proactive approach, identifying and addressing any technical issues that we were then able to bring to the client’s attention and resolve.
We were also able to provide our buy-side and sell-side clients with test packs to streamline their testing processes through our collaboration with Delta Capita. Lastly, earlier this year we launched Report Hub, a service which simplifies and streamlines the complex data and operational requirements of SFT reporting. As a result of these efforts, client feedback has been very positive – in our latest client survey, satisfaction rates were well above 90 percent.
In addition to our own efforts, a number of industry bodies including the International Securities Lending Association and ICMA have made significant contributions to promote best practice in helping market participants to comply with SFTR.
Notwithstanding these successes, there have been some technical challenges that the industry has faced, namely the ISO schema and technical guidelines which were issued a few months before go-live. This compressed the preparation timeline for market participants as the schema dictates how to report and any small change can significantly affect how a firm undertakes reporting. It is important that this is taken into consideration during the consultation on the EMIR Refit later this year.
Looking ahead, sell-side market participants are now turning their attention to finalising their operations to be able to support their buy-side clients who are opting for delegated reporting, with the exception of the reporting of collateral reuse which the buy side are beginning to realise can be achieved in-house. Of course, there are a large number of buy-side firms who will choose to report themselves – they too are now focusing on for the go-live in October.
Catherine Talks, product manager, SFTR, UnaVista
In the run up to the SFTR go live we observed firms increasing the amount of testing that they were undertaking. In order to support firms we set up a series of daily calls to answer questions and discuss any issues that were occurring or where known. The weekend deployment of production changes in the system went well, we had pre-run the process a number of times in the previous month when deploying code into UAT and production so the process was well tested.
On Monday we started to receive production data. The acceptance rate, was quite surprising. We were expecting a higher number of rejections in the first weeks but the acceptance rate was above 90 percent and has consistently averaged over 90 percent in the following weeks. We had a number of support measures in place and have been actively reviewing TR submission data discussing with firms where the acceptance is under 80 percent in order to assist and improve in reporting performance.
The volumes of reports in the days since go live have been increasing which is expected behaviour but feedback from the market around the TR public data is that volumes are lower than anticipated. This could be due to an array of factors; the phasing of reporting, the backloading change under COVID or perhaps other factors.
The SFTR team has worked round-the-clock to help firms prepare for go live, right through the testing cycle and into production. I think we are all quietly pleased that the first two phases of firms have gone into production so smoothly but there is still much to do assisting firms in their preparations for the October reporting phase and beyond.”
13 July will be long remembered by securities finance professionals as the go-live date for SFTR.
Jonathan Tsang, director, securities finance, IHS Markit
The date would have been 13 April, however, ESMA announced a three-month delay resulting in the July date; the delay was fortuitous in that it gave stakeholders in the reporting process additional time to integrate some last-minute changes. The go-live date did finally arrive, and the collective years of planning were put to the test.
As we approached midnight on the 13 July, the team at IHS Markit mobilised to prepare the platform to ingest its very first SFTR files. The system opened at 2am London time and the first file that was received passed without any validation errors. The opening was smooth, all clients were well prepared as they had already tested in our pre-production environment. Crucially, we had no client connectivity issues. The only surprise was that we had anticipated more volumes on the first day considering what we had experienced in pre-production.
Our colleagues at Pirum were also at the ready and the first unique transaction identifiers (UTI) were shared at 2.51am and we made our first reports to the TR shortly after 4am.
Pairing and reconciliation are the primary challenges for the reporting requirement, so the focus was to ensure the smooth loading of client data in order to run through the solution and start the pairing process. This ensured the efficiency of the UTI and data exchange and clients were able to monitor this process carefully. The legal entity identifiers (LEI) of the issuer population is another challenge, however, a new opt-in feature will allow clients to minimise its impact.
One very positive item is our client services team responses and readiness; for months ahead of go-live, the mantra was to handle any queries in UAT as if it were production. We ran a support bridge for the first 48 hours of the roll-out to monitor the system and support continuous uptime. For the second week after go-live date we saw more than a third drop in the cases, with a very high rate of same-day closure.
Since 13 July, we have received around 10 million records daily, of which 750,000 to 1 million reports are submitted to the three TR. In terms of ACK ratios we see a very high success rate above 96 percent for transactions. The collateral ACK rate is more moderate and remains a challenge for some clients but this has improved since go-live as clients continue to make good progress with data remediation.
The challenges of SFTR compliance are both the massive scale of all securities lending and repo transactions as well as the intricate detail of matching, which is why so much focus and effort was required to prepare for the go-live date. Despite the updates to the regulation and the moving target of the go-live date, the collaboration with Pirum and our clients made the roll-out go smoothly with results to match the intensity of the preparation to deliver them.
Simon Davies, SFTR business development manager, Pirum Systems
Over the past few weeks, we have seen the first live trades being submitted successfully to TR. We are very pleased with how things went overall and feedback from the industry is that we are seeing a much better state compared to EMIR at the same point. Following the start of data loading to IHS Markit, our SFTR partner, on the 13 July, we started to receive data to pair between counterparts. The pairing rates we are seeing (this is prior to TR submission) have increased steadily since go-live as firms’ bed down their submission processes and issues are identified and resolved.
The main cause of non-pairing on trade date is due to one side missing their booking. This is a combination of missing trades from counterparts, timing of the report submission, and reference data mapping (i.e. LEI set up and counterpart onboarding set up) that needs to be reviewed by firms.
Given the critical nature of this in sharing UTIs and other information, firms have been working through issues and as expected, pairing rates are improving over time.
Whilst the pairing rates are looking reasonable overall and improving, trades with a fully matching data set are much lower. This is not unexpected from the pre go-live testing results and from conversations with clients, who have generally prioritised fields that are required for TR pairing (UTI, LEIs and master agreement) and validation of data to get good ACK rates. This is certainly pragmatic, but the missed opportunity to remediate data as part of the SFTR programme delivery is likely to provide a hangover for firms now they are live.
Core economic data generally matches; however, reference, static data, and pricing / valuation data are more likely to not match. As firms settle down with their reporting, we are discussing matching fields in more detail and how firms can use automation and workflow to prevent these breaks from occurring in the first place.
There has been a huge effort across the industry, led by the industry bodies, in understanding and working through the reporting challenges. Along with IHS Markit, we are proud to have been part of that effort and have been in a unique position to help bring together this work for the benefit of so much of the industry. We look forward to continuing with this beyond the initial go-live, and helping firms understand and resolve any remaining issues whilst we collectively work to improve industry metrics. This will ensure we have a better, more efficient reporting process for securities finance than has been achieved under previous regulations.
We would like to thank everyone involved at Pirum and IHS Markit, along with our clients for their input and support to get us to this stage. The feedback we have received to date has been resoundingly positive and that the implementation has been smoother than seen with EMIR and MIFIR. Given that many of us and our clients are working from home, collective celebrations will need to wait a while, but we’re now able to take advantage of a quieter period to have a rest, recharge and get ready for phase three.
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