The Securities Financing Transactions Regulation (SFTR) introduces requirements to improve transparency and monitor the risks associated with the securities financing transactions market. See our overview of the Regulation.
Coronavirus: our approach to supervising reporting under the Securities Financing Transactions Regulation
26 March 2020
On 26 March ESMA updated its statement on the implementation of SFTR, providing further clarity on the backloading requirement. We have updated our supervisory approach to align with ESMA’s, and clarified this in the statement below.
20 March 2020
The European Supervisory & Markets Authority (ESMA) has published a statement addressing the challenges firms are facing to meet their reporting requirements under the Securities Financing Transactions Regulation (SFTR) before the 13 April 2020 implementation date, at a time where firms are facing significant challenges due to the coronavirus pandemic.
In its statement, the ESMA expects national Competent Authorities to not prioritise supervisory activity towards firms’ compliance with the SFTR reporting obligation between 13 April 2020 and 13 July 2020. This also applies to the requirement for firms to report securities financing transactions (SFTs) under the Markets in Financial Instruments Regulation (MiFIR) when their counterparty is a member of the European System of Central Banks. ESMA also confirmed it will not prioritise trade repository registration ahead of 13 April 2020 but it will ensure TRs are registered before 13 July 2020.
We support ESMA's statement. To allow firms to focus their resources on critical functions during this period, we will not prioritise supervision of these reporting requirements until at least 13 July 2020. We will not require firms to back report any securities financing transactions that are concluded between 13 April 2020 and 13 July 2020. In addition, we will not prioritise supervision relating to the reporting of SFTs for firms to which the backloading requirement specified in Article 4(1)(a) applies.
Firms in scope of the first 2 application phase-in dates should continue to plan to meet their requirement to report securities financing transactions under SFTR and MiFIR from 13 July 2020.
We will continue to keep this situation under review.
SFTR, Brexit and the transition period
Having left the EU, the UK has now entered a transition period which is due to operate until 31 December 2020. During the transition period, EU law will continue to apply in the UK.
SFTR directly applies in the UK during the transition period. We refer to this regime on this webpage as EU SFTR. At the end of the transition period this Regulation will convert into UK law (be onshored) under the European Union (Withdrawal) Act 2018 (EUWA). The regime after the end of the transition period is referred to below as UK SFTR.
Trade repositories (TRs) registration for UK SFTR
It will allow TRs who wish to offer services under the UK SFTR to register with the FCA, or apply in advance, and operate in the UK immediately after the end of the transition period.
Further details, including draft application forms, will be provided in due course.
EU SFTR implements recommendations following the Financial Stability Board (FSB) review of the shadow banking sector after the financial crisis. The Regulation applied in part from 12 January 2016 and aims to improve transparency of securities financing transactions.
It imposes requirements on all types and sizes of EU and UK entities who enter into securities financing transactions (SFTs) such as repo transactions, securities lending transactions, margin lending transactions and commodities lending transactions. It also applies to non-EU and non-UK firms if the securities financing transaction is concluded through an EU or UK branch.
In addition, EU SFTR has registration and operational requirements for TRs offering SFTR repository services, and defined levels of access to data for different authorities.
EU SFTR requires entities that are in-scope to:
- report details of their SFTs to a registered or recognised TR
- in the case of funds, meet disclosure requirements relating to the use of securities financing transactions and total return swaps in pre-investment documentation and regular reports to investors
- comply with disclosure obligations to counterparties in relation to the re-use of collateral
|11 April 2020||Reporting obligation becomes applicable for phase 1 firms.|
|11 April 2019||Technical standards in relation to reporting requirements and requirements for TRs entered into application.|
|13 July 2017||Disclosures by funds on the use of securities financing transactions entered into application (for pre-contractual documents).|
|13 January 2017||Disclosures by funds on the use of securities financing transactions entered into application (for periodic reporting).|
|13 July 2016||Conditions for re-use of collateral entered into application.|
|12 January 2016||SFTR came into force.|
Firms can email [email protected] for any SFTR queries.