The Securities Financing Transactions Regulation (SFTR) (Regulation (EU) 2015/2365), which amends the European Market Infrastructure Regulation (EMIR) (Regulation (EU) No. 648/2012) and concerns the transparency of securities financing transactions (SFTs) and the reuse of collaterals, entered into force on January 12, 2016.

As a “sister” regulation, the SFTR closely resembles the EMIR, especially in terms of reporting obligations. According to Article 4 of the SFTR, financial, non-financial and central counterparties shall ensure that each conclusion, modification or termination of any SFT shall be reported to an authorised trade repository (TR) by the end of the business day following the transaction day. The reporting scope has been defined by the European Securities and Markets Authority (ESMA) in the form of technical standards (ITS / RTS). The SFTR closes existing regulatory gaps in securities financing markets. Furthermore, the SFTR introduces extended transparency requirements for managers of investment funds (UCITS and AIF) and enacts further reporting obligations concerning the reuse of collaterals.

In a similar way to EMIR Article 9, SFTR Article 4 distinguishes between financial and non-financial counterparties (NFCs). The stated reporting obligations are generally applicable for both groups; however, the responsibility for fulfilling the reporting obligations in regards to a SFT between a financial counterparty and a NFC lies with the financial counterparty, as long as the NFC has not exceeded at least two of the following three threshold values on their balance sheet dates: (i) EUR 20,000,000 balance sheet total, (ii) EUR 40,000,000 net sales, and (iii) an average of 250 employees during the financial year.

The following instruments are subject to this reporting obligation:

  • Repurchase Agreements
  • Buy-Sell Backs and Sell-Buy Backs
  • Securities- / Commodities Lending
  • Margin Lending

Transactions with central banks are excluded from this reporting obligation.

Reporting requirements were published by ESMA in the form of technical standards (ITS / RTS) and submitted to the European Commission for approval on March 31, 2017. Analogous to EMIR, the report must be filed with an authorised TR by the end of the business day following the transaction day (t+1).

The ESMA technical standards came into force on April 11, 2019. The reporting obligation according to Art. 4 SFTR will gradually become applicable for different counterparty classes, starting with credit institutions and investment firms on April 11, 2020.

Application of the regulation by type of institution

Affected institutions

Applicability

Credit institutions and investment firms

April 11, 2020

Central Counterparties (CCPs) and Central Securities Depositories (CSDs)

July 11, 2020

Insurance and reinsurance companies, managers of undertakings for collective investments in transferable securities (UCITS) or alternative investment funds (AIF), and Institutions for occupational retirement provision

October 11, 2020

Non-financial counterparties

January 11, 2021

The SFTR reporting obligation will also be applicable for existing SFTs, as long as they have a maturity of more than 180 days on the initial reporting date (fixed-term contracts) or are still active for at least 180 days after this point in time (open-term contracts). Since the reporting start depends on the category of the institution, the backloading period, which has been set up to 190 days, also starts on that date.

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