The Securities Financing Transactions Regulation SFTR
The Securities Financing Transactions Regulation, SFTR (Regulation (EU) 2015/2365) entered into force on 12 January 2016. Although transaction reporting under SFTR will not commence until 2020, significant technical changes to the market’s existing data flows are required to fulfil the new reporting obligation.
The SFTR defines an “SFT” (Securities Financing Transaction) as comprising the following:
(a) repurchase transactions;
(b) lending and borrowing of securities or commodities;
(c) buy-sell back and sell-buy back transactions; and
(d) margin lending transactions;
Each is more fully defined in the SFTR, but in summary each concerns the raising of finance through the use of assets owned by a counterparty to the transaction.
Notably, although the regulation does not cover derivative contracts, the definition of SFTs does include liquidity swaps and collateral swaps, which do not currently fall under the European Markets and Infrastructure Regulation (“ΕΜΙR”) definition.
The SFTR also requires disclosure of certain information pertaining to total return swaps. A “total return swap” is defined as a derivative in which one counterparty transfers the total economic performance, including income from interest and fees, gains and losses from price movements, and credit losses, of a reference obligation, to another counterparty.
ΜΑΡ FinTech is engaging clients, industry bodies and other market infrastructure providers to identify and discuss the changes that are required to implement SFTR transaction reporting. ΜΑΡ FinTech is developing a specialised product to support SFTR reporting needs to offer clients a comprehensive solution to satisfy their SFTR reporting needs.