SFTR revisited: How can European markets benefit from digital regulatory reporting?

Abstract

This paper evaluates the structural limitations of the Securities Financing Transactions Regulation (SFTR) and presents digital regulatory reporting (DRR), supported by the common domain model (CDM), as a viable framework for improving regulatory data quality and reducing the cost and complexity of compliance. SFTR’s dual-sided reporting framework was introduced to enhance transparency in securities financing markets but has led to widespread operational challenges, including inconsistent life cycle event reporting, data granularity issues, valuation mismatches, schema constraints and regulatory divergence. These shortcomings have produced persistent reconciliation breaks and inflated compliance expenditures across European financial institutions. The paper positions DRR as a transformative alternative to text-based regulation. By expressing regulatory rules as machine-executable code, DRR standardises interpretation and eliminates ambiguity in reporting logic, ensuring that identical transactions yield consistent outputs across firms. When combined with the CDM — a standardised, open-source representation of financial products and life cycle events — DRR enables a uniform, business-aligned view of transaction inputs and codified reporting instructions. The paper demonstrates how this approach directly addresses key SFTR problem areas, from collateral classification to timestamp tolerances, by exposing and harmonising the underlying business logic. While the CDM already supports derivatives reporting across multiple jurisdictions, extending it to SFTR requires additional modelling of securities-finance-specific trade events such as recalls and reallocations. The paper concludes with a proposed transition pathway combining market-driven adoption, incremental implementation and regulatory encouragement through guidance rather than prescriptive reform, arguing that a DRR-enabled framework would yield higherquality supervisory data and strengthen the resilience and competitiveness of European capital markets. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.