This article is the first part of the ‘SFTR Shorts’, a series of bite-sized discussions around various aspects of the Securities Financing Transaction Regulation (SFTR). Alan McIntyre, Senior BA and Industry Relations Lead at Regtek.Solutions drills into various aspects of the reporting requirements under SFTR and identifies some of the challenges that firms will need to consider. Register here to hear more during our webinar on SFTR on the 13th of March.
To reduce the cost and burden on the industry, ESMA is mandated to minimise overlaps and avoid inconsistencies between the technical standards implemented for SFTR and EMIR. Accordingly, for pragmatic reasons they look to utilise, or at least provide the opportunity to utilise, as much of the existing EMIR infrastructure as possible.
The legal framework laid down by SFTR should, to the extent possible, be the same as that of EMIR in respect of the reporting of derivative contracts to trade repositories registered for that purpose.
In practical terms, this involves allowing the existing EMIR Trade Repositories (TRs) to apply to extend their product coverage to cover SFTR reporting, and letting any new firms that wish to launch a TR for SFTR do so. This is to follow the registration model implemented under EMIR, and operate on a level playing field to the existing TRs in terms of the regulatory supervisory regimes that apply in Europe to TRs.
ESMA is therefore updating parts of the EMIR RTS that relate to the Registration, Operation and Supervision of Trade Repositories to bring these RTS into line with what is being proposed for SFTR.
In order to achieve the objectives of both Regulations and ensure the consistency of frameworks and approaches to the extent possible, ESMA is also undertaking certain amendments to the technical standards under EMIR, in particular those on registration of TRs, and those defining the access levels of authorities.
The good news for reporting firms is there are no EMIR RTS changes that are likely to impact their EMIR reporting programs and require any additional reporting requirements. The EMIR changes within this consultation paper effectively are all work for the TRs, and any potential entrant TRs, to digest and tackle. Better still, this deliberate policy to harmonise the TR regimes for EMIR and SFTR should create a harmonised environment that makes it simpler for reporting firms to extend their EMIR reporting infrastructure and control frameworks to cover SFTR.
For the regulators, this is also an eminently sensible aim because many of the 100+ National Competent Authorities (NCAs) across the EU that currently access the EMIR data will gain oversight and access to SFTR data. This initiative to ensure that all EMIR and SFTR TRs are following the same model, and meeting the same requirements, should ensure consistency and create a more efficient environment. At the end of the day, the reporting firms will be the ones covering all the costs of establishing the SFTR reporting infrastructure and supervision, so this does seem to make a lot of sense for all involved.
Senior BA and Industry Relations Lead at RegTek.Solutions
Please join the discussion with Alan on the LinkedIn group: SFTR Transaction Reporting group