What is SFTR?
In January 2014 the European Commission published a proposal to regulate Securities Financing Transactions (SFTs) as part of its ongoing commitment to the Financial Stability Board (FSB) to monitor financing markets and illuminate shadow banking. This new regulation responds to the need to enhance the transparency of the securities financing markets.
Expected to apply from early 2019, the Securities Financing Transactions Regulation (SFTR) will set new reporting obligations which will have an impact on repos transactions and their related commodity financing techniques.
SFTR impact on repo transactions
SFTR will apply to repo clients who are established in the EU (including all of their branches, irrespective of where they may be located). SFTR will also have a wider global impact as it may also apply to all counterparties to an SFT with a branch in the EU.
Under SFTR repo counterparties will be required to report SFT’s in an EMIR style report to an authorized trade repository. Structurally, obligations under SFTR share a number of similarities with EMIR:
- Counterparties have to report details of the ‘conclusion, modification and termination’ of any SFT to an approved TR on a T+1 basis.
- In addition to the reporting of the SFTs, counterparties also have to report the associated collateral.
- The reporting obligation is dual-sided however unlike EMIR, for trades between financial counterparties and small non-financial counterparties, the financial counterparty is required to report for both sides. Delegated reporting is also permitted.
- Reporting counterparties must identify themselves using a Legal Entity Identifier (LEI). Unique Trade Identifiers (UTIs) are also required for all trades reported.
For repo firms, reporting matched and accurate trade data will become a key factor to ensuring regulatory compliance.
How can DTCC help?
The key to enhancing data quality for SFTR includes effectively matching repo trades before reporting:
- Ensure high transparency and consistency to post-trade processing
- Reduce the occurrence and impact of trade settlement fails
- Ensure that reporting data for all counterparties to a repo transaction is correct, thereby improving regulatory compliance and risk management
Regulatory reporting – GTR
DTCC’s Global Trade Repository (GTR) is the largest trade repository in the world supporting over 6000 customers globally. DTCC’s GTR will be entering the securities financing market as a registered trade repository and will enable clients to meet their reporting obligations under SFTR.
Being industry owned, GTR provides one of the most cost efficient methods for clients to meet their SFTR regulatory requirements.
To find out more about GTR, visit dtcc.com/gtr.
LEI reporting – GMEI
SFTR will require all parties to a repo transaction to be identified with an LEI.
The GMEI utility, owned and operated by Business Entity Data (BED) B.V., a wholly owned subsidiary of DTCC and a LEI Operating Unit (LOU) accredited by the Global Legal Entity Identifier Foundation (GLEIF), is a global best-in-class solution enabling organizations with multiple legal entity subsidiaries and affiliates to register and maintain reference data for all of their entities in a single location.
To find out more about the GMEI Utility, visit gmeiutility.org.
Trade matching and SSI enrichment – CTM and ALERT
The CTM platform supports LEI’s and the provision and exchange of reporting information. This includes transactional data, Standing Settlement Instructions (SSI) data and CRD data enrichment.
CTM provides clients the ability to match buy/sell-back and single security bilateral repos. Workflows and matching fields cater to repo specific trade processing activities.
CTM also enables the enrichment of Standing Settlement Instructions for repo transaction data via ALERT and the reporting information exchange for UTI and LEI data.
To find out more about CTM, visit dtcc.com/ctm and to learn more about ALERT Enrichment visit dtcc.com/alert.
Brochure - GTR:
The Reporting Solution for SFTs
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SFTR Trade Reporting:
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Contact us today to learn more about how DTCC can help you prepare for SFTR.
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