ESMA confirms ICMA proposals for reporting of central bank repos under MiFIR


21 May 2020 In response to an ICMA query, ESMA has provided some clarifications on the reporting of repos transacted with EU central banks. Under SFTR, SFTs transacted with one of the 27 EU central banks that are part of the European System of Central Banks (ESCB) are exempted from the reporting obligation. However, these trades have in turn been included in the scope of MiFIR transaction reporting. This requirement will apply at the same time as SFTR goes live. However, there has been only limited additional guidance as to how repos and other SFTs can be reported under MiFIR, considering that the reporting framework has not been designed to cater for SFTs and their specific characteristics. Following extensive discussions, ICMA’s SFTR Task Force developed a proposal to report repo trades under MiFIR, consisting of two sample reports and an explanatory note. Both documents were submitted to ESMA in November 2019 for review and validation.

The ESMA response received on 8 May 2020 confirms all the main aspects of the ICMA proposals and also addresses two open questions that we submitted alongside those proposals. In particular:
  • The basic principle proposed by ICMA was confirmed. Under MiFIR, it is the collateral that should be reported, not the repo itself.
  • Only the purchase leg needs reporting.
  • Repos with multiple collateral securities should be reported as a Complex Trade, a concept introduced for certain derivatives. This means breaking up such a repo into components.
  • In cases where the collateral allocation is only available after the T+1 reporting deadline, ESMA leaves it to National Competent Authorities to assess whether the delay is justified, taking into account that the reported trade is an SFT.
  • Pledge-based repos (which are really secured loans, not repos) must be reported, because the rules on what to report are set by SFTR, not MiFIR, and ESMA has interpreted SFTR as including pledge-based repos.

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