Drafted by the European Parliament in 2015 and approved in 2017, Securities Financing Transaction Regulation (SFTR) was adopted by the European Commission (EC) last week. The adoption comes after a Regulatory Technical Standards (RTS) were created along with feedback from the European Securities and Market Authority (ESMA) earlier this year.
The EC adoption puts the regulation in the implementation process with the final RTS to be made public and expected to be published soon. The final RTS will include details of becoming authorized as a trade repository as well as the reporting field formats and product under scope details.
The go live date will be implemented in stages depending on company types. Go live for banks is expected for Q2 2020, with investment firms, insurance companies and funds to be under scope of SFTR during Q3 and Q4 of 2020. Non-financial firms trading SFTs will be the last to fall under SFTR, with the regulation capturing them in 2021.
Despite over a year of implementation, 2019 can be a time for preparation. Two of the areas that should be focused on are data capture and product scope definitions.
In relation to data capture, EMIR’s rollout in 2014 and MIFID II in 2018 have taught the importance of knowing both what data will be used for reporting as well as how this information can be extracted. In the time before SFTR goes live, investment firms can focus on identifying the required data fields for their trade reports and what existing information they collect can be used for those requirements. The next step is determining the easiest way to pull existing data from trade systems to easily create SFTR reports.
In addition to data, product scope is an area that is expected to be in focus next year. While many SFT products defined by the RTS draft are clear, firms and regulatory specialists will be spending time to understand what non-typical transactions are also caught under SFTR and what is excluded.
If you are looking to learn more about SFTR, download the Practical Guide to SFTR Reporting