Published: 23rd March 2016

Of Relevance to:
Firms concluding Securities Financing Transactions


Securities Financing Transactions Regulation: ESMA Discussion Paper

As advised in Regulatory Roundup 72, reporting and transparency obligations will arise in respect of securities financing transactions (“SFT”) – for the definition of a SFT, the timetable and overview of the requirements please refer to the above mentioned article.

To support the Regulation (“SFTR”) ESMA is required to develop draft regulatory technical standards (“RTS”) and implementing technical standards (“ITS”) for submission to the European Commission by 13 January 2017.

With this in mind ESMA has published an initial discussion paper – as a preliminary approach prior to drafting ITS/RTS for consultation – inviting feedback to in excess of 140 questions appearing therein (the questions are collated in Annex II of the discussion paper). Firms that will be subject to the SFTR will be interested in Annex I which contains tables of fields requiring completion in respect of:

  • Counterparty data
  • Transaction data
  • Collateral data

The above data is sub-divided between the various types of SFT:

  • Repurchase agreements and reverse repurchase agreements
  • Sell-buy back and buy sell-back transactions
  • Securities and commodities lending and borrowing
  • Margin lending and borrowing

Apart from reporting obligations, the SFTR also imposes transparency requirements in respect of the use of SFTs on both UCITS Investment Companies/Management Companies and AIFMs which will appear in the half yearly/annual reports as well as the prospectus (UCITS) and the pre-investment disclosure (AIFMs). However the discussion paper does not provide any further expansion of these transparency requirements. Given the discretionary nature of the wording in Articles 13 and 14 of the SFTR (“ESMA may …. develop …”) ESMA believes that the wording in the Annex to the Regulation is sufficiently clear and that further specifying the contents of the said Annex by drafting regulatory standards would not be the best approach at this stage (but will monitor developments in market standards).

Feedback on the discussion paper is invited by 22 April 2016. An ESMA consultation paper is expected “early in Q3 2016”.

Key Dates:

  • ESMA will consider all comments received by 22 April 2016.
  • ESMA to submit draft RTS and ITS to the European Commission by 13 January 2017.
  • Transparency obligations apply from 13 July 2017 (or with immediate effect to funds constituted after 12 January 2016).
  • Reporting requirement phased in over a period of 12 to 21 months after entry into force of the RTS.
  • Reuse of instruments received under a collateral agreement obligations apply from 13 July 2016.
  • Please see Regulatory Roundup 72 for further key dates.

 

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