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EU SFT Regulation
Various regulatory initiatives are currently under way to foster transparency in repo and securities lending and borrowing markets. Taken together, these initiatives have the potential to substantially change the way repos and other securities financing transactions (SFTs) are processed today.

Most significantly, the EU SFT Regulation is set to introduce an extensive reporting regime for SFTs in Europe, and is expected to go live by the end of 2018.

The ICMA ERCC SFTR Task Force has been following closely the legislative process for SFTR and the related technical standards that are being prepared by ESMA. In this context, the Group has submitted detailed responses to two public consultations undertaken by ESMA and is now working towards the implementation of the rules.



SFTR implementation: Bilateral reconciliation exercise for repos and buy/sell-backs

31 May 2017 - In order to facilitate the upcoming implementation of the extensive SFTR reporting regime, the ICMA ERCC has launched a bilateral repo and buy/sell-back trade reconciliation exercise. All ERCC members are strongly encouraged to reach out to their major counterparties to test SFTR reconciliation, based on the standard document published by ICMA. The main aim of this exercise is to identify among all the reporting fields put forward by ESMA in the final draft technical standards those fields (and transaction types) that are most likely to cause problems in terms of reconciliation. Based on the outcome of the exercise, the ICMA ERCC aims to undertake further targeted industry work, including with the relevant vendors, to develop additional guidance and market practices for critical reporting fields and transaction types, where necessary, to avoid excessive operational burden in the future.

Download the instructions and templates for the ICMA ERCC bilateral reconciliation exercise



SFTR level 2 – draft technical standards

Under the SFT Regulation the European Securities and Markets Authority (ESMA) is mandated to prepare regulatory and implementing technical standards (RTS and ITS) to specify the implementation details of the law. In particular, this includes important details of the extensive reporting framework for SFTs introduced by SFTR article 4.

On 11 March 2016, ESMA published a first discussion paper for public consultation to which the ICMA ERCC submitted a detailed response on 22 April.

This was followed by an ESMA consultation paper published on 30 September 2016. The ICMA ERCC submitted its response on 30 November 2016, alongside some specific comments on the list of proposed reporting fields.  

On 31 March 2017, taking into account feedback received in response to the two public consultations, ESMA published the final draft RTS and ITS. These are currently under review by the Commission and are expected to be finalised by the end of 2017.



SFT identification and reporting: Regulatory overview paper and impact analysis

Given the various ongoing initiatives, the ICMA ERCC Operations Group is actively working towards a better understanding of the regulatory requirements, their impact on the post-trade processing of repo transactions as well as solutions to help firms establish an efficient operating model to manage the changes. The latter includes work towards market-wide, standardized procedures, templates and messaging protocols.

The first step is to obtain a clear understanding of the various regulatory requirements. For this purpose, the ERCC Operations Group has published a detailed overview of all relevant regulatory initiatives on the identification and reporting of SFTs, including some background on each of the regulations and a summary of the key provisions. This paper is regularly updated and extended as the regulatory requirements continue to evolve. More recently the briefing paper has been supplemented by a set of slides, which aim to present in a simplified and clear way the operational challenges presented by the various regulations. The slides include flow diagrams which help to illustrate the impacts on the different stages of the repo lifecycle and include references to the more relevant sections of the detailed overview paper. This impact analysis serves as a problem statement but also sets out the agenda for the ERCC Operations Group by identifying a number of key areas of work where further harmonisation and standardisation may prove beneficial. While the impact analysis currently covers all the different SFT reporting initiatives, it is intended to add a separate section on CSDR requirements as soon as the related technical standards have been finalised by ESMA (expected in January 2016).    

Download the detailed SFT reporting overview (last update: 9 August 2016)

See the Impact Analysis slides (last update: 8 February 2016)