The approach used to link securities financing transactions with their respective loans is just one example of the many aspects that the new guideline document seeks to shed its light on.
The publication, by the European Securities and Markets Authority (ESMA) is simultaneous with that of related documents: a final report, amended validation rules and a statement on legal entity identifiers (LEI).
“The guidelines will contribute to the reduction of costs along the complete reporting chain – the counterparties that report the data, the TRs which put in place the procedures to verify the completeness and correctness of data, and the authorities, defined in Article 12(2) SFTR, which use the data to supervise risks to financial stability,” the regulator comments in its press release.
It goes on to list the aspects which it aims to clarify:
• The reporting start date when it falls on a non-working day.
• the number of reportable SFTs;
• the population of reporting fields for different types of SFTs;
• the approach used to link SFT collateral with SFT loans;
• the population of reporting fields for margin data;
• the population of reporting fields for reuse, reinvestment and funding sources data;
• the generation of feedback by TRs and its subsequent management by counterparties, namely in the case of (i) rejection of reported data and (ii) reconciliation breaks; and
• the provision of access to data to authorities by TRs.
Industry news site Global Custodian observes that the now published policies introduce a 12-month grace period from a central SFTR requirement “for market participants to provide an LEI for a security issued from a third-country when reporting their SFTs”.
As many SFTs issued in Asia and the US lack the LEI, an immediate requirement to supply it “would result in significant difficulties for European-based beneficial owners, hedge funds, agent lenders, and tri-party agents, in complying with the reporting rules, and could even lead to trades being rejected and therefore significantly narrowing the amount of acceptable collateral,” writes Global Custodian.