03 May 2016

ESMA（欧州証券市場機構）、SFTR（証券金融取引規則）に基づくRTS（規制上の技術的基準）とITS（適用上の技術的基準）案に関するディスカッション・ペーパーへのコメントを公表

The SFTR is the European Union’s response to the global initiative to bring more transparency to shadow banking activities. The new rules on transparency require both financial and non-financial market participants to report details of their securities financing transactions. Details to be reported include the composition of the collateral, whether the collateral is available for reuse or has been reused, the substitution of collateral at the end of the day and the haircuts applied.

Deutsche Börse Group

The re-use of collateral from SFTs (trade collateral) is a standard process. A CCP receives collateral from the clearing member on one side (borrower/ cash receiver) and delivers on the collateral to the clearing member on the other side (lender/ cash provider). This should be clearly differentiated from the re-use activities within the bilateral market place. Deutsche Börse assumes that providing collateral to cover a CCP’s margin requirements will not become part of the SFTR reporting.

Deutsche Börse sees serious issues with the reporting of the prior UTI in a novated CCP transaction. As this needs to be issued by the bilateral counterparts and reported to the CCP it remains unclear to us what happens if no prior UTI or differing prior UTIs are reported by the bilateral counterparts. Deutsche Börse does not think making the prior UTI a mandatory matching field for CCP novation is a good idea – this would seriously constrain the novation of bilateral transactions into central clearing.

Furthermore, Deutsche Börse sees severe issues and huge implementation costs for CCPs and the whole market for the reporting of selective master data fields for counterparties and securities. The CCP only knows its direct counterparty i.e. the Clearing Member (or in selected cases the related Non Clearing Member or Trading Member) but does not know a potential Beneficiary behind those counterparties and hence cannot report this. For securities master data we strongly question the approach of sending data on top of the ISIN code. The receiving party can easily derive additional data to the respective ISIN code from its own security master data.

Substantial effort and additional cost is incurred with the reporting of additional data elements which are currently not available to us but remain questionable for us in term of added value. Those are e.g. the 'sector of the reporting counterparty' and the ‘LEI and jurisdiction of the issuer of securities’.

Full Deutsche Börse response

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International Securities Lending Association

Whilst acknowledging the need to streamline reporting constructs and systems with those already developed for EMIR, it is important to recognise that securities lending operates around some very different fundamentals to those typically seen in the derivatives world. These differences do create a natural tension between the development of an EMIR like reporting regime and the way in which securities lending operates in practice.

There is considerable focus on trade date reporting in the level 1 text and this DP. There are clear parallels here with EMIR. We have stated previously that unlike derivatives markets, the exposure or risk associated with SFTs does not effectively crystallise until the transaction settles. Typically counterparties involved in securities lending measure and manage risk based on settled positions only. Therefore ESMA’s desire to gather trade date information is out of step with how this market works. Further, many of the proposed reporting constructs are unduly complicated as ISLA tries and reconciles ESMA’s desire to gather trade date information when the essence of SFT risk exposure is such that it can only really be reported upon settlement. It therefore strongly urges ESMA to reconsider moving to the reporting of settled transactions only.

Securities lending also sees the greatest concentration of agency business of any SFT market where lending agents, who are typically custodial banks, assets managers or specialist intermediaries lend securities on behalf of institutional investors who make their securities available for lending.

The key point here is that it is the lending agent who provides the detail of the underlying clients to the borrower and although we acknowledge ESMA’s desire for dual sided reporting the borrower can only ever report what the lending agent has told him.

A similar framework exists around non-cash collateral which today dominates in Europe. Here collateral posted by a borrower does not arrive in the account of the lender until settlement date and it is therefore highly problematic to report any details of collateral until it has settled. Furthermore once received by the lending agent they will have to allocate the collateral securities down to the LEI level of the lending principal. It is at this point the true position of settled loans and collateral may be reported. From the DP it is clear that ESMA appreciates how collateral moves around in the system but we feel that a move to settlement based reporting would create a much clearer and easily reconcilable data set.

Full ISLA response

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ICE Clear Europe

The main comment of ICE is that CCPs are significant users of SFTs, as well as providing a role in clearing transactions. Under Article 45(2) of Commission Delegated Regulation (EU) No. 153/2013, CCPs are required to invest 95% or more of the cash collateral that they hold in non-cash assets, such as government bonds. This is recognised in the Discussion Paper at paragraphs 216 and 269(b) but there is no mechanism for SFT reporting to distinguish between cleared transactions and "CCP as user" transactions.

OCE is furthermore very concerned at the duplication of reporting and regulation implied at paragraph 269, p. 82 of the Discussion Paper and its consequences for CCPs. The rationale for SFT regulation cannot be CCP supervision because a CCP's regulators already have access to all the information referred to here under EMIR.  Replicating it in a trade repository to which different regulators have access has no purpose, rationale or benefit if those regulators are not the CCPs' supervisors.  Moreover, the Draft Rules should not place an increased reporting burden on CCPs that would have the effect of creating a shadow CCP regulatory regime.

ICE is concerned that the requirement to report collateral re-use may be unworkable or render delegated reporting unworkable.  The Draft Rules contemplate, as is currently the case in the market, the counterparties delegating their reporting obligations under the SFTR to their banks.  However, if the counterparties are required to report re-use of collateral, either on a transaction specific or entity level, they will not necessarily want to share information on the percentage of reuse of their securities (for the purposes of delegating reporting) with such banks / counterparties.  Furthermore, if collateral reuse is calculated on an entity level i.e. on an aggregate/net basis across transactions with counterparties with the same underlying, no single bank will have visibility on that aggregate information.  Again, delegated reporting will be unworkable as the counterparties are required to report this on an entity level, on a daily basis.

This therefore appears to require a third party to be involved in the reporting required by the SFTR (whereas currently, we understand reporting under EMIR is often carried out by one or other member of the transaction).  If that is indeed the case, concentration of reporting services in a limited number of third party service providers may itself give rise to additional risks relating to security and dependency.

Full ICE response

AFG

AFG supports the analysis that led FSB and European Authorities to the conclusion that Re-Use potentially carries risks of a systemic nature; as a consequence, we share the objectives of enhancing financial stability of SFTR and we believe that  funds that do not use significant leverage should have been granted a specific proportionate “light regime”; we also believe that single sided reporting is more efficient for authorities to immediately capture relevant data and less expensive for stakeholders to implement;

AFG insists on the necessity to capitalize on preexisting data collection processes and believe that the reference to EMIR and the use of TRs (that have been introduced under EMIR) in order to collect data on SFTs is commendable. However it is very disappointed to see that the MIFID/MIFIR reporting obligations are considered independently of the preexisting framework of other regulations. The fact that they have different objectives does not justify the absence of a transversal approach;

As a general rule and with the exception of hedge funds, asset managers rarely use SFTs to leverage their portfolios; re-use of non-cash collateral is totally forbidden for UCITS according to ESMA guidelines; fund managers use Efficient Portfolio Management, mostly reverse repo to secure their cash holdings and securities lending in order to increase the return for their client investors; consequently, asset management is not an issue in terms of financial stability and should not, with the exception of hedge funds, be the focus of SFT regulation; a proportionate “light regime” of reporting should be provided for UCITS and AIFs that do not use significant leverage;

Full AFG response

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European Association of CCP Clearing Houses (EACH)

Regarding the proportionality of the reporting obligation, the current scope contemplated under the proposed reporting framework is very wide, as it encompasses transactions, lifecycle events, collateral (including value and substitutions), and settlement details. This approach will result in a significant amount of data, which may not be practically reported. EACH also expects that some difficulties will arise in linking these elements together, for instance linking collateral with trades. As a result, it may be difficult for market participants and regulators to interpret the reported data and therefore achieve the transparency objective of the SFTR.

EACH expects that the implementation of SFTR reporting will result in significant costs for all market participants, given the complexity, level of granularity and quantity of information requested under the proposed framework. A simplification of the reporting process, focusing on key data elements only (such as counterparties, transaction value, settlement maturity, collateral amount and identity of custodian) would significantly reduce the implementation costs and would also improve data quality.

EACH members are furthermore very concerned about the potential duplication of reporting and regulation implied at paragraph 269, p. 82 of the Discussion Paper and its consequences for CCPs. In their view, the rationale for SFT regulation cannot be CCP supervision because EMIR already provides CCP's regulators the access to all the information referred to here. Replicating it in a trade repository to which different regulators have access has from our point of view no purpose, rationale or benefit if those regulators are not the CCPs' supervisors.

Full EACH response

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Full Discussion Paper

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