[ M A R K E T
R E V I E W
|
S F T R ]
SFTR
Get ready for a rough ride
When it comes to the complex reporting of securities financing
transactions, market participants need to be ready as the deadline
approaches for this previously lightly-regulated activity.
I
t’s time to turn your attention to the Securities Financing
Transaction Regulations (SFTR) and here’s why.
Firstly, it’s complicated. Market participants active in
repo and securities lending markets have not had to comply
with reporting requirements before when engaging in these
activities. It’s been a lightly regulated space. Therefore,
with an estimated 150 reporting fields to fill in, the need
for unique transaction identifiers (UTI), and dual-sided
reporting – among others - the challenges will be vast. The
chains involved with the re-use of the collateral securities
in other securities financing transactions will also add to the
complexity.
“The industry of securities lending is complex,” says Ben
Challice, head of agency lending and collateral management
at JP Morgan. “The standard chain is the beneficial owner
lending their shares through a custodian or third-party, who
lends to a broker dealer, who represents a hedge fund which
is often the end user. This is a true definition of an OTC mar-
ket, but underscores its complexity.”
Secondly, there may not be the forbearance from regulators
that we have seen in the past. Despite grace periods with the
comparable OTC derivatives reporting requirements back
in 2016, one source tells Global Custodian, “the tolerances
Summer 2018
globalcustodian.com
49