18 August 2021 - We are pleased to share with you the August edition of ICMA’s Repo and Collateral newsletter focusing on the key initiatives and workstreams undertaken by ICMA’s European Repo and Collateral Council (ERCC) as well as other relevant repo market developments.
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ICMA ERCC initiatives and workstreams
CSDR mandatory buy-ins
Industry awaits guidance on mandatory buy-in implementation: It is widely hoped that the EU’s mandatory buy-in (MBI) regime, part of the CSDR Settlement Discipline (SD) provisions, will not come into force, as scheduled, in February 2022. Rather, the MBI framework will be subject to a rigorous review and rethink, while the effects of the other pillars of SD, including cash penalties, are assessed. It is further hoped that this will be communicated to the market well ahead of the rapidly approaching go-live date. In recent weeks ICMA has been meeting with various regulators and policy makers to press home the industry’s concerns about the MBI regime, which include an absence of legal clarification on a number of critical implementation issues, some significant design flaws, as well as the widely expected negative impacts on bond and repo market liquidity. ICMA has also shared widely a briefing note outlining these concerns
In the meantime, ICMA is coordinating with other trade associations on how to progress contractual solutions (covering both repo and cash bonds) for day one compliance, whilst waiting for clarification on the regulatory implementation schedule.
ESMA publishes updated Level 3 guidance: On 29 July, ESMA published a set of long-awaited updates to the SFTR level 3 guidance documents, including an updated version of the EU SFTR validation rules as well as updated XML reporting schemas. The documents are available on ESMA’s SFTR webpage, along with the full list of published implementation guidance. The updated validation rules are due to apply from 31 January 2022. ICMA has reviewed the changes and circulated a summary analysis to the ERCC’s SFTR Task Force. The updates have also been incorporated in the latest internal version of the ICMA SFTR recommendations.
UK HMT Wholesale Markets Review: On 1 July, the UK Government published a consultation on the HMT Wholesale Markets Review. The consultation paper includes a section on relevant reporting requirements, including a specific question on the reporting of SFTs concluded with central banks, which are currently reportable under UK MiFIR. On 4 August, ICMA, jointly with ISLA, had a call with the FCA to have an initial discussion on this specific question and is currently consulting with members on the different options before finalising its feedback as part of ICMA’s broader consultation response by the deadline of 24 September.
UnaVista shuts down its SFTR trade repository: UnaVista Limited and UnaVista TRADEcho B.V., as authorised trade repositories under UK and EU SFTR respectively, have announced that they will close down their UK and EU SFTR trade repository services on 31 January 2022. UnaVista explained that the move will allow them to reallocate resources towards MIFIR and EMIR reporting services and offered their support to clients to assist with the porting process.
Settlement efficiency: The ERCC’s targeted work with members to support and improve settlement efficiency across the market continues. The initiative was launched earlier this year, as part of the industry effort to prepare for CSDR settlement discipline and has gained good momentum since then. A particular objective is to better understand and encourage the use of post-trade tools which are available to help reduce settlement fails and mitigate their impact. The ERCC is currently running focused workshops to discuss such tools and specific related recommendations. A first workshop was held in May focusing on partial settlement and auto-partialling. This was followed by a second workshop in July to discuss the shaping of settlement instructions and assess whether this could be applied on an automated basis in Europe. Finally, a third workshop is scheduled for 10 September and will look into (auto-)borrowing services offered by ICSDs and custodians and the scope for related improvements. A number of follow-up discussions are already under way, including with the relevant market infrastructures and other stakeholders, industry bodies and the ECB. Concrete conclusions and next steps will be communicated in autumn once the workshop series has been concluded.
Repo & sustainability
ERCC report summarising the consultation feedback: ICMA has reviewed all the feedback received in response to the ERCC consultation paper on the role of repo in green and sustainable finance and drafted a summary report which assesses all the responses, highlighting the key themes for each of the questions and setting out some proposed next steps for ICMA. The draft summary report has been circulated to the relevant ERCC Committees and working groups for review before publication in early September.
Common Domain Model (CDM) for repo and bonds: On 21 July 2021, ICMA held a virtual event providing a round-up of its CDM project for repo and bonds, including demonstrations of the CDM in action, as well as a panel discussion with members of ICMA’s CDM Steering Committee on key take-ways from the project, the path to implementation and next steps. The recording of the CDM event (1h:25) is available here. Individual CDM demonstrations from the event can also be found here:
An introduction to Rosetta by REGnosys (5 mins)
CDM in action – execution, clearing and settlement of a repo transaction by FINXIS LLC (8 mins)
Download the presentations by ICMA’s Gabriel Callsen and REGnosys.
The virtual event marked the conclusion of the initial phase of the CDM project for repo and bonds. ICMA is planning to distribute a survey to the ERCC community to determine next steps.
MoU between ICMA, ISDA and ISLA: On 2 August 2021, ICMA, ISDA and ISLA signed a Memorandum of Understanding (MoU) to strengthen collaboration between them on the future development of the CDM.
FinTech Directory for repo and cash bonds: ICMA is conducting a review of the Operations FinTech directory for repo and cash bonds. The directory currently lists over 180 solutions across 10 categories including collateral management, corporate actions, and intraday liquidity monitoring, amongst others.
Repo Trading Technology Directory: ICMA is conducting a review of the Repo trading technology directory. The directory currently lists 18 electronic trading venues and other technology solutions such as order and execution management systems.
Members are encouraged to flag any new solutions that are not yet covered by the directories. Solution providers are invited to send updated details and flag new offerings. Please contact us for further details.
Other repo and collateral market developments
5 August 2021: Bank of England Monetary Policy Summary
28 July 2021: Federal Reserve Decisions Regarding Monetary Policy Implementation
22 July 2021: ECB Monetary policy decisions
Papers and reports
10 August 2021: ICMA Briefing Note on ECB bi-monthly PEPP data (June-July 2021)
26 July 2021: Macroeconomic impact of Basel III finalisation on the euro area, ECB Macroprudential Bulleting, Article No. 14.
26 July 2021: Asset Purchase Facility Quarterly Report - 2021 Q2, Bank of England
23 July 2021: Dash for dollars, Bank of England, Staff Working Paper No. 932
22 July 2021: Fiscal and monetary policy interactions in a low interest rate world, BIS Working Papers No 954
Repo market data
SFTR Public Data: ICMA has been collecting and aggregating the SFTR public data on a weekly basis. For a more detailed breakdown and related charts for both market segments, please visit our SFTR public data page.
Repo market data hub: ICMA’s webpage includes a repo market data hub, which is refreshed on a monthly basis. Currently this includes:
The data is sourced from Bloomberg and CME Group Benchmark Administration Limited. Any data vendors who would like to contribute to the repo market data hub are encouraged to reach out to us.
Meetings and events
ERCC General Meeting, 13 October 2021 (virtual)
Sponsored by Pirum
The ERCC’s autumn General Meeting will feature a combination of keynote addresses, panel discussions, and updates on the main ERCC workstreams, covering the latest repo market trends, including the role of repo in sustainable finance, as well as relevant regulatory initiatives, including CSDR settlement discipline and related industry initiatives to support settlement efficiency. Further details on the agenda will be available in due course.
ERCC Professional Repo Market and Collateral Management workshop, 27, 28 September and 4, 5 October (virtual)
Sponsored by Euroclear
After a break in 2020, this year ICMA will again hold its annual Professional Repo and Collateral Management Workshop, the repo industry’s principal educational forum, designed for new repo market practitioners and other participants who are seeking a thorough understanding of the repo market and the latest related developments. Thanks to Euroclear’s support, attendance is free for ICMA members.
Securities Operations Foundation Qualification (SOFQ), September 1, 2, 3, 9 and 10
Operations Certificate Programme, September 15, 16, 17, 22, 23, 24, 29, 30 and October 1, 6
SFTR: Repo Reporting in Practice – September 21 and 22
Corporate Actions: An Introduction, October 4, 5, 11 and 12
Collateral Management – October 21, 22, 28 and 29
Introduction to Repo - November 3, 4, 10 and 11
Understanding the GMRA – November 17, 18, 19, 24 and 25
Securities Lending (in collaboration with ISLA) – November 22, 23, 29, and 30
Corporate Actions: Operational Challenges, November 29, 30 and December 6, 7
For an overview of the full suite of ICMA Education courses, available online in livestreamed or self-study format, please check our website.