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What you need to know about the new Securities Financing Transaction Regulation
Journal of Securities Operations & Custody,
11
(1),
14-25
(2018)
Abstract
After the most recent economic recession in 2008– 2009, the European financial market has seen a great deal of regulatory changes. These changes have significantly impacted how firms, entities and counterparties operate and manage securities as well as manage and report transactions. In addition to the European Market Infrastructure Regulation (EMIR), the Markets in Financial Instruments Directive1 (MiFID II, 2014/65) and the Markets in Financial Instruments Regulation2 (MiFIR, 600/2014) entered into force. Securities Financing Transaction Regulation (SFTR), the newest regulatory change, aims to increase transparency by requiring all entities to report the specifics of their securities financing transactions (SFTs) to an approved European Union (EU) trade repository (TR). While the rules for these reports have not yet been officially finalised (at the time of this writing), these new rules will present a number of challenges to firms, entities, counterparties, TRs and investment companies. From data fragmentation to new costs related to disclosure requirements, all entities and counterparties will be required to adapt to these new obstacles sooner rather than later in order to be prepared for the planned start date in 2019. Furthermore, pending finalisation of the SFTR, all repos, securities loans, buy and sell back, total return swaps and similar transactions will need to be declared to an EU TR. Both financial and nonfinancial counterparties will be subject to these requirements. Aside from the challenges that the new SFTR regulation will likely impact firms, branches, entities, institutions, repositories and so on, there are also a number of basic solutions that can be utilised to mitigate challenges and risks and also successfully satisfy the new reporting requirements. This paper addresses the scope of SFTR, the overall impact, the challenges and even solutions to help entities and counterparties prepare for SFTR to go into force.
Keywords: SFTR; MiFID II; EMIR; transaction reporting; trade data; data reconciliation
The full article is available to subscribers to the journal.
Author's Biography
Hagen Tiller is a Member of Commerzbank’s Legal Department and a Legal Specialist within the group OTC/Capital Markets Infrastructure. Before he joined Commerzbank in 2015, he practiced in the Frankfurt offices of the law firms Sidley Austin, LLP (a law firm based in the United States), and KPMG Rechtsanwaltsgesellschaft mbH (KPMG’s law firm in Germany). His practice is focused on the legal and regulatory aspects of the value chain of financial instruments and comprises, inter alia, market infrastructure topics, including legal agreements with trading and execution venues (ie terms and conditions of exchanges, multilateral trading facilities and bilateral trading agreements), the settlement and clearing of financial instruments, custody services and safekeeping of financial instruments and regulatory requirements for investment services (algorithmic and high-frequency trading, EMIR, MiFID2/R, German Securities Trading Act, MAD2/R CSDR, etc). Hagen represents Commerzbank in several working groups of international and national banking associations (eg AFME, ISDA, EBF, Association of German Banks and Association of German Public Banks) as well as of the German Federal Financial Supervisory Authority. He also gives regular speeches with regard to the legal and regulatory developments in the banking sector, currently, with the emphasis on MiFID2/R.
Andreas Roussos is Chief Business Development Officer for Point Nine Limited. Andreas is a performance-driven professional with a proven ability to achieve business development and revenue generation goals in high-pressure and fast-moving environments. His professional focus is adding client value. He is also skilled at consulting with clients to precisely analyse their individual situations and develop solutions to achieve their targets. Andreas’s ability to aggressively build solid clientele and increase revenue combines with a comprehensive knowledge of and experience in financial technology solutions. Since August 2015, Andreas has been a Partner at Point Nine Limited, a FinTech company offering trade processing and transaction reporting solutions. The expertise, services and products of Point Nine Limited allow customers to manage their posttrade processing, operations and transaction reporting efficiently as well as in a transparent manner. The company has already processed and reported more than two billion derivative trades on behalf of its global customers.
