Global Custodian Summer 2018 | Page 49

[ 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