The Second in the “SFTR Shorts” series By Alan McIntyre
In order to reduce the cost and burden on the industry, ESMA is mandated to minimize overlaps and avoid inconsistencies between the technical standards implemented for SFTR and EMIR. Accordingly, for pragmatic reasons they look to utilize, or at least provide the opportunity to utilize, 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 TRs to apply to extend their product coverage to cover SFTR reporting, and involves letting any new firms that wish to launch a TR for SFTR 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 undertaking also 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 harmonize the TR regimes for EMIR and SFTR should create a harmonized 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 also have 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 it’s the reporting firms that will need to cover all the costs of establishing the SFTR reporting infrastructure and supervision so this does seem to make a lot of sense for all involved.
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