In her recent FT article, ‘The hidden pipes of finance may be furring up’, Gillian Tett discusses JP Morgan pulling out of the tri-party repurchase (repo) market. Whilst the article is interesting and illustrates the pressures on Banks to focus their resources on more profitable activities it was really the description of the repo market that resonated most with me:
“the tri-party repo sector is akin to household plumbing — deeply unglamorous and easy to ignore unless the system breaks down and creates a mess”
Deeply unglamorous and easy to ignore. Ouch!
This resonated because of something that’s been puzzling me for a while now. Why does SFTR (the EU’s Securities Financing Transactions Regulation) seem to be getting so little attention compared to MiFIDII/MiFIR? It’s probably a safe assumption that over 95% of the readers of a post like this could readily tell me that the compliance date for MiFIDII is January 2018. This has been discussed in great detail. The one-year delay and whether it should mean full steam ahead or take pause and reduce your project budget has been discussed to death. Even an unlikely potential further delay has also been much discussed. It’s safe to say that MIFIDII is one of the biggest topics and fully funded projects across the banking and asset management industry with all eyes nervously on January 2018.
SFTR on the other hand doesn’t appear to have anywhere near the same momentum or attention. I wonder how many of that estimated 95% could tell me the proposed compliance dates for SFTR transaction reporting for instance?
The estimated dates are:
- April 2018 for Credit Institutions (Banks)
- October 2018 for Insurance/Reinsurance and Funds/Fund Managers
So based on the current timeline SFTR transaction reporting commences only three months after MiFIR transaction reporting. I would imagine/expect that this timeline will get pushed out and probably won’t go live so close to the MIFIDII compliance date. Even if that perception is shared by others it still doesn’t fully explain why SFTR isn’t being discussed a lot more than it is. SFTR Transaction reporting is very similar to the transaction reporting implemented under EMIR and when I think back EMIR had a lot more attention at this stage than SFTR seems to have gathered currently.
ESMA published the SFTR draft RTS/ITS consultation paper in March. The consultation closed at the end of April and ESMA has published the consultation responses. The clock is most definitely ticking on SFTR and unless/until the compliance dates are officially amended the timeline is very similar to the 16 months remaining to implement MIFIDII. It’s surely time to get the SFTR project discussions going properly.
I’ve set up the SFTR Transaction Reporting group. Please join me there if you are interested in this topic.