With these transactions cash or securities are borrowed against collateral composed of securities, commodities or cash – this includes repurchase transactions, securities lending, sell/buy-back transactions and margin lending.
Steven Maijoor, ESMA Chair, said: “Bringing transparency and oversight into the multi-trillion euro market of securities financing transactions is an important step in closing a regulatory gap. It is pivotal for financial stability that the risks associated with non-bank alternative credit provision are properly addressed. The SFTR will provide transparency on the use of securities financing transactions, and will allow identifying risks associated with the collateral and its reuse.”
The SFTR will require both financial and non-financial market participants to report details of their SFTs to an approved EU trade repository (TRs). These details will include the relevant terms of the repo, stock or margin loan, 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.
ESMA’s final standards provide detailed provisions on:
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SFT reporting – including the use of ISO 20022 methodology for reporting, validation and access to data;
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data collection and availability – the use of standardised identifiers such as LEI, UTI and ISIN which should improve data quality and aggregation across TRs;
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defined access levels for different public authorities;
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registration and extension of registration of TRs – detailed requirements on:
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verification of completeness and correctness of reports;
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data availability and integrity;
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operational separation;
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ancillary services;
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outsourcing;
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IT resources; and
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exchange of data on sanctions between authorities .
ESMA has developed its reporting standards for SFTs building on its experience with the European Market Infrastructure Regulation (EMIR), and other EU-wide reporting regimes in order to align reporting standards to the maximum extent possible.
In addition to the SFTR, ESMA is proposing certain amendments to the existing standards implementing EMIR. These amendments are to ensure a level-playing field for market participants with regard to registration and access rules.
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