ESMA Delays SFTR Reporting Requirements

Shanny Basar

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, is issuing a Public Statement to ensure coordinated supervisory actions on the application of Securities Finance Transactions Regulation (SFTR), in particular, on the requirements regarding the reporting start date, as well as the registration of Trade Repositories (TRs). This approach is needed in response to the effect of current adverse developments events as a result of the COVID-19 pandemic.

ESMA expects competent authorities not to prioritise their supervisory actions towards entities subject to Securities Finance Transactions (SFT) reporting obligations as of 13 April 2020 and until 13 July 2020. ESMA also expects TRs to be registered sufficiently ahead of the next phase of the reporting regime, i.e. 13 July 2020, for credit institutions, investment firms, CCPs and CSDs and relevant third-country entities to start reporting as of this date.

ESMA continues monitoring closely the implementation by the relevant market participants as well as the impact of the relevant measures taken with regards to COVID-19 to ensure alignment of SFT reporting requirements and supervisory practices in the EU.

Source: ESMA

From ICMA:

In response to our letter of 16 March, ESMA has issued a public statement on Actions to mitigate the impact of COVID-19 on the EU financial markets – postponement of the reporting obligations related to securities financing transactions under the Securities Financing Transactions Regulation and under Markets in Financial Instruments Regulation.

The statement includes significant parts of our letter and clarifies the following:

“ESMA therefore expects competent authorities not to prioritise their supervisory actions towards counterparties, entities responsible for reporting and investment firms in respect of SFT reporting obligations, under SFTR and under MIFIR, as of 13 April 2020 and until 13 July 2020, including regarding to SFTs concluded in that period of time, and to generally apply their risk-based approach in the exercise of supervisory powers in their day-to-day enforcement of applicable legislation in this area in a proportionate manner.

Further, ESMA does not consider it necessary to register any TR ahead of 13 April 2020. This will give TRs more time to cope with the emergency and be ready to support the new reporting regime at a later point in time. ESMA is also not available to record the details of SFTs. As a result, counterparties, entities responsible for reporting and report submitting entities will be unable to report by the reporting start date.”

While this move is broadly welcome, ICMA is consulting with the European Repo and Collateral Council’s SFTR Task Force, which represents a cross-section of the industry to discuss the practical impacts of this delay for the markets.

IHS Markit reacts to SFTR delay notification

IHS Markit and Pirum Systems acknowledge the 19th March announcement from ESMA to delay Phase 1 of SFTR reporting from April 2020 to July 2020.

Together, we remain fully engaged with our clients and other market participants and will continue conducting end-toend testing with each of the respective trade repositories. We are prepared to work through the challenging times ahead to ensure that the industry is ready to meet the obligations now scheduled for July 2020.

Given the combined challenge of managing COVID-19 workplace arrangements and volatile global markets, it is our view that this delay will allow all market participants more time to effectively test and prepare for SFTR reporting. Nevertheless, we remain committed to delivering a production-ready SFTR reporting solution by the end of March 2020 and our comprehensive support is available throughout the transitional period to Phase 1.

UnaVista, the reporting arm of the London Stock Exchange Group, has been in conversation with ESMA and said in a statement:

Reporting start date
ESMA has stated they are now not expecting firms to report their SFTs to a trade repository prior to 13 July.

Should firms wish to try and de-risk their go-live, they may still be able to elect to go-live on UnaVista’s trade repository prior to this date. ESMA are going to be providing clarity on this shortly. Please contact your account manager if your firm is interested in doing this.

No back reporting needed for the grace period
For firms with a 13 April reporting obligation there will be no back reporting required for transactions executed during the grace period of 13 April-12 July.

Other reporting phases remain
Currently the only go-live date affected is the 13 April. The remaining three phases will commence as planned.

Registration of the Trade Repositories
ESMA does not consider it necessary to register any TR ahead of 13 April 2020. UnaVista will notify clients when ESMA confirm our trade repository license.

Val Wotton, DTCC

Val Wotton, product development & strategy, derivatives and collateral management at DTCC, said in an email to Markets Media: “DTCC has been encouraged by the industry’s progress around SFTR preparations to date – evidenced by the testing which is currently underway; however, in light of the current circumstances, we support ESMA’s move to provide market participants with additional time to prepare.”

DTCC has opened the production environment for pre-production testing for SFTR to enable code, test production connectivity and submission of messages.

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