Quick Find:
EU SFT Regulation
The EU SFT Regulation (SFTR) was proposed in 2014 to foster transparency in repo and other SFT markets in Europe. In order to achieve this, SFTR is set to introduce, among other things, extensive transaction reporting requirements for SFTs. While many of the other SFTR provisions already apply today, the reporting regime itself will go live in four phases. The first phase was due to start reporting on 11 April, but this has been delayed by ESMA to 13 July due to concerns related to the COVID-19 pandemic.

In 2015, the ICMA ERCC created a dedicated SFTR Task Force. Over the past years the group has grown significantly in size, reflecting the scale of the challenge that SFTR poses to Repo and other SFT markets. The Task Force now includes representatives from over 150 firms covering the whole spectrum of the market, including buy-side, sell-side, market infrastructure providers, but also Trade Repositories and other service providers that are offering solutions to help reporting firms comply with SFTR. The main objective of the ERCC SFTR Task Force is to develop a common understanding of the requirements and to develop market best practices in relation to SFTR reporting to complement guidance provided by regulators. The work is undertaken in close collaboration with other trade associations and the relevant regulators, in particular ESMA. The Task Force is chaired by Craig Laird, Morgan Stanley. The result of this work was published initially on 24 February, in form of the detailed ICMA recommendations for Reporting under SFTR. A second update to the guide was published on 30 June (see right-hand side).

ICMA’s work on SFTR implementation is undertaken in close collaboration with other trade associations and the relevant regulators, in particular ESMA. The SFTR Task Force is chaired by Craig Laird, Morgan Stanley.

For further information about ICMA’s work in relation to SFTR or if you would like to join the ERCC SFTR Task Force, please contact alexander.westphal@icmagroup.org.

 
ICMA ERCC publishes second update to its SFTR recommendations

30 June 2020 The ERCC has today published a further update to the ICMA Recommendations for Reporting under SFTR. The document was initially published on 24 February, followed by a first comprehensive update on 22 April. The third public version published today includes a number of updates resulting from the ongoing discussions in the ERCC’s SFTR Task Force. Importantly, it also incorporates the latest guidance received from ESMA on 25 May in response to some outstanding ICMA queries on the final SFTR Guidelines (initially submitted to ESMA in late January). On the two key topics, the reporting of settlement fails and bilateral variation margining, ESMA decided unfortunately not to follow the ICMA proposals which were based on an established industry consensus and reflected in the previous recommendations. Aligning to the latest guidance therefore required extensive changes to some of the recommendations. While the current version of the Recommendations is in line with ESMA’s latest response, it is worth noting that ICMA has followed up with ESMA separately to reiterate its concerns with the guidance and to ask ESMA to reconsider. For reference, ICMA published a blackline version of the recommendations which highlights all the changes made since the previous published version (dated 22 April).

The ICMA Recommendations for Reporting under SFTR aim to help members interpret the regulatory reporting framework specified by ESMA and set out complementary best practice recommendations to provide additional clarity and address ambiguities in the official guidance. The recommendations are complemented by additional best practice documents developed by ICMA, including a set of SFTR sample reports and an overview of lifecycle event reporting for repos. Both documents have also been updated today to reflect the changes to the recommendations. Related best practice documents:



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.



ICMA ERCC releases updated version of its SFTR recommendations

22 April 2020 The ERCC has today published an updated version of the ICMA Recommendations for Reporting under SFTR. The ICMA guide was initially published on 24 February and aims to help members interpret the regulatory reporting framework specified by ESMA and sets out complementary best practice recommendations to provide additional clarity and address ambiguities in the official guidance. As compared to the initial publication, the version published today includes relevant updates, including to reflect the recently granted 3-month delay to the first phase of the SFTR go-live as well as the forbearance on backloading. The updated version also covers a number of new questions, as well as additions and revisions to existing recommendations covered in the guide. For ease of comparison, ICMA published, alongside the new guide, a blackline version which shows all the changes that have been made since the initial publication. Going forward, the document will continue to evolve to reflect ongoing discussions in the ERCC SFTR Task Force as well as any additional guidance received from ESMA and/or the NCAs. Further updates will be made available on the ICMA website. 
Related best practice documents:



ICMA offers clarification of ESMA’s delay to the SFTR go-live

31 March 2020 ICMA has published a summary of the latest ESMA statements issued on 19 March (and updated on 26 March) and their practical implications for reporting parties. The conclusions set out in the note have been agreed with members of ICMA’s SFTR Task Force and are intended to provide additional clarity for member firms and other SFTR stakeholders. The conclusions already reflect a number of informal discussions with ESMA and some NCAs, with whom the note has been shared, even if neither ESMA nor the NCAs are in a position to officially endorse the note.




ESMA clarifies position on backloading

26 March 2020 ESMA issued an updated version of their initial statement (published on 19 March) which granted a 3-month delay to the SFTR phase 1 go-live to 13 July. Responding to requests by ICMA and others, the updated statement clarifies some aspects of the initial statement which were not clear, specifically in relation to the implications for the backloading requirement. The updated statement clarifies that ESMA’s expectation that NCAs will not enforce reporting obligations between 11 April and 12 July also covers the back-loading provisions, for banks and credit institutions (phase 1), but also for all other firms that will eventually become subject to SFTR reporting obligations in the remaining three phases. In effect, this clarification allows all firms subject to SFTR reporting to no longer consider backloading as a requirement.

ICMA welcomes this clarification and the rapid and pragmatic response by ESMA. Complementing ESMA’s statement, a number of NCAs have already or are planning to publish additional updates confirming their specific plans to align with ESMA’s guidance.  
 
Related announcements:
UK: FCA approach
NL: AFM approach




COVID-19 – ESMA postpones reporting obligations under SFTR

19 March 2020 In response to concerns raised by ICMA and ISLA in a letter on 16 March, ESMA has issued a public statement on Actions to mitigate the impact of COVID-19 on the EU financial markets – postponement of the reporting obligations related to securities financing transactions under the Securities Financing Transactions Regulation and under Markets in Financial Instruments Regulation.

The statement effectively postpones the first phase of the SFTR reporting go-live applicable to banks and investment firms by 3 months, from 11 April to 13 July. More specifically, ESMA clarifies:     
 
“ESMA therefore expects competent authorities not to prioritise their supervisory actions towards counterparties, entities responsible for reporting and investment firms in respect of SFT reporting obligations, under SFTR and under MIFIR, as of 13 April 2020 and until 13 July 2020, including regarding to SFTs concluded in that period of time, and to generally apply their risk-based approach in the exercise of supervisory powers in their day-to-day enforcement of applicable legislation in this area in a proportionate manner.
 
Further, ESMA does not consider it necessary to register any TR ahead of 13 April 2020. This will give TRs more time to cope with the emergency and be ready to support the new reporting regime at a later point in time. ESMA is also not available to record the details of SFTs. As a result, counterparties, entities responsible for reporting and report submitting entities will be unable to report by the reporting start date.”

 
While this move is broadly welcome, ICMA continues to monitor closely any further developments in relation to the COVID-19 pandemic and will liaise with ESMA as regards further action, as required. This work is done in close consultation with member firms represented in the European Repo and Collateral Council's SFTR Task Force, which brings together representatives from around 150 firms to coordinate the industry’s SFTR implementation work in relation to repo.




ICMA together with ISLA writes to ESMA to request a delay to the implementation of reporting under SFTR

16 March 2020 Amidst the escalating COVID-19 pandemic, ICMA and ISLA have sent a joint letter to ESMA to ask for a delay to the SFTR reporting go-live date, due on 11 April 2020. In support of this request, the letter includes concrete examples of the significant challenges that the COVID-19 pandemic and the related measures pose to members’ SFTR implementation projects.




ICMA’s ERCC publishes guide to reporting under the SFTR  

24 February 2020 The ERCC has today published its guide to reporting under the EU Securities Financing Transactions Regulation (SFTR). The ICMA guide aims to help members interpret the regulatory reporting framework specified by ESMA and sets out complementary best practice recommendations to provide additional clarity and address ambiguities in the official guidance. It is supplemented by a suite of sample reports and an overview of repo life-cycle event reporting, which have both been published today. The documents evolved over the past couple of years as a product of discussions within the ERCC’s SFTR Task Force, benefitting from substantial input provided by members. They will continue to evolve to reflect additional guidance from ESMA and/or the NCAs or changes in the market consensus in relation to a specific question or market practice.

On the occasion of the launch, ICMA hosted a webinar to discuss the role of the cross-industry work as well as the state of industry preparations less than 2 months ahead of the reporting go-live. The webinar was hosted by ICMA’s Richard Comotto and Alex Westphal who were joined by two members of the SFTR Task Force, Craig Laird (Morgan Stanley), who is chairing the group, and Ben Campion (UBS). A webinar recording is available here for ICMA members (login required).



ESMA releases final implementation guidance on SFTR reporting

6 January 2020 ESMA published today the long-awaited final Level 3 guidance for SFTR Reporting. Most importantly, this includes the final version of the detailed Reporting Guidelines, which incorporate stakeholder feedback to the consultation over summer on a draft version of the document. Alongside the Guidelines ESMA also published a Final Report summarising and responding to the consultation feedback, as well as an amended version of the SFTR Validation Rules and a statement on LEI codes. The latter responds to industry concerns in relation to the mandatory reporting of LEI codes for issuers, granting a 12-month grace period for the reporting of LEI codes of non-EU issuers. The package of ESMA’s Level 3 measures is completed by a set of XML schemas in ISO20022 format which specify standardised message formats for the communication between reporting firms and their TR, but also between TRs and between TRs and authorities.



ICMA publishes Master Regulatory Reporting Agreement (MRRA) in association with AFME, FIA, ISDA and ISLA

19 December 2019 ICMA has today jointly published the Master Regulatory Reporting Agreement (MRRA), in association with AFME, FIA, ISDA and ISLA. The MRRA provides users with a template agreement for documenting regulatory reporting arrangements in relation to derivatives and securities financing transactions entered into under industry standard documentation, such as the Global Master Repurchase Agreement (GMRA). EMIR (as amended by EMIR Refit) and SFTR impose delegated and mandatory reporting obligations on parties entering into derivative and SFT contracts, respectively. The MRRA has been structured on a modular basis, featuring various schedules, a Derivatives Annex (in relation to EMIR) and a Securities Financing Transactions Annex (in relation to SFTR). Parties can assemble an agreement which is appropriate for their trading relationships and reflects their regulatory obligations.



ICMA ERCC responds to ESMA’s consultation on SFTR Reporting Guidelines

30 July 2019 – The ICMA ERCC has submitted a detailed response to ESMA’s consultation on draft Guidelines in relation to SFTR Reporting under articles 4 and 12. The response was prepared based on feedback from the ERCC’s SFTR Task Force, which brings together more than 600 individuals from over 100 member firms, including sell-side, buy-side, market infrastructures and service providers, leading the industry’s implementation effort in relation to repo. The response form itself was submitted alongside two further documents prepared by the Task Force over the past months, a list of SFTR sample reports, as well as detailed overview table on the reporting of repo lifecycle events.



ESMA issues draft SFTR Reporting Guidelines for consultation

27 May 2019 - ESMA has issued a consultation paper on draft Guidelines in relation to SFTR reporting. The consultation paper itself was published alongside an updated and consolidated version of the SFTR Validation Rules. Both documents form part of the so-called Level 3 measures which ESMA is mandated to adopt and which serve to provide further guidance for the industry in relation to SFTR implementation, beyond the SFTR itself and the related technical standards. The deadline for stakeholders to submit a response to the consultation is Monday 29 July 2019.




Final RTS and ITS under SFTR published in the Official Journal  

22 March 2019 - The full package of SFTR Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) has been published in the EU’s Official Journal. This marks an important milestone in the SFTR adoption process. In total, this consists of 10 different delegated and implementing regulations which will enter into force 20 days after their publication, i.e. on 11 April 2019. Key documents include:
  • Delegated Regulation 2019/356 specifying the details of securities financing transactions (SFTs) to be reported to trade repositories, including Annex with reporting tables;
  • Implementing Regulation 2019/363 with regard to the format and frequency of reports on the details of SFTs to trade repositories, including Annex with reporting tables and format descriptions; and
  • Delegated Regulation 2019/358 on the collection, verification, aggregation, comparison and publication of data on SFTs by trade repositories, including Annex with reconciliation requirements.
Besides providing the final technical details, the publication of the RTS and ITS also determines the implementation timeline of SFTR. The relevant reporting go-live dates are as follows (where the legal go-live date below is on the weekend, effective go-live is on the next business day):
  • 11 April 2020: Reporting go-live for banks and investment firms (12 months after entry into force)
  • 11 July 2020: Reporting go-live for CCPs & CSDs (15 months after entry into force)
  • 11 October 2020: Reporting go-live for most of the buy-side (18 months after entry into force)
  • 11 January 2021: Reporting go-live for non-financial counterparties (NFCs) (21 months after entry into force)



Commission adopts final RTS and ITS under SFTR

13 December 2018 - the European Commission has adopted the long-awaited SFTR technical standards specifying the extensive reporting regime for SFTs which the law is set to introduce. The technical standards were adopted as a package, including three delegated regulations with Regulatory Technical Standards (RTS) and one implementing regulation setting out Implementing Technical Standards (ITS), including Annexes:
  • Commission delegated Regulation with regard to regulatory technical standards specifying the details of securities financing transactions (SFTs) to be reported to trade repositories: Main text and Annex with reporting tables.
  • Commission delegated Regulation with regard to regulatory technical standards on the collection, verification, aggregation, comparison and publication of data on securities financing transactions (SFTs) by trade repositories: Main text and Annex with reconciliation requirements.
  • Commission delegated Regulation with regard to regulatory technical standards on access to details of securities financing transactions (SFTs) held in trade repositories: Main text.
  • Commission implementing Regulation laying down implementing technical standards with regard to the format and frequency of reports on the details of securities financing transactions (SFTs) to trade repositories: Main text and Annex with reporting tables.



ICMA publishes 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




ESMA submits final draft RTS and ITS to the Commission

31 March 2017 – ESMA has submitted its final SFTR Report including the draft technical standards for review and endorsement to the European Commission.
ESMA’s final draft standards provide detailed provisions on:
  • SFT reporting – including the use of ISO 20022 methodology for reporting, validation and access to data;
  • data collection and availability – the use of standardised identifiers such as LEI, UTI and ISIN which should improve data quality and aggregation across TRs;
  • defined access levels for different public authorities;
  • registration and extension of registration of TRs – detailed requirements on:
    • verification of completeness and correctness of reports;
    • data availability and integrity;
    • operational separation;
    • ancillary services;
    • outsourcing;
    • IT resources; and
    • exchange of data on sanctions between authorities.



ESMA consultations on draft RTS and ITS under SFTR


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 2016.

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.




ICMA publishes regulatory overview paper and impact analysis on SFT reporting initiatives

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)
ICMA SFTR Webinars

8 April 2020 - SFTR - Latest Developments & ICMA Best Practices, Alexander Westphal, Director, ICMA
View the webinar  |  Download the presentation

24 February 2020 - ICMA guide to reporting under SFTR - launch and webinar
On the occasion of the launch of the ICMA guide to reporting under SFTR, ICMA hosted a webinar to discuss the role of the cross-industry work as well as the state of industry preparations less than 2 months ahead of the reporting go-live. The webinar was hosted by ICMA’s Richard Comotto and Alex Westphal who were joined by two members of the SFTR Task Force, Craig Laird (Morgan Stanley), who is chairing the group, and Ben Campion (UBS).

A webinar recording is available here for ICMA members (login required).



ICMA Quarterly Report - SFTR update

6 April 2020 - download the latest SFTR update from ICMA’s Quarterly Report for the second quarter of 2020.













Presentations on SFTR

24 October 2019 - view the SFTR update presented at the SFTR Seminar in Luxembourg.










SFTR Task Force update



ICMA podcast: an introduction to SFTR

22 February 2019 - SFTR is designed to encourage greater transparency in repo and securities lending and borrowing markets. It will introduce an extensive reporting regime for these transactions in Europe. Alexander Westphal from ICMA's Market Practice and Regulatory Policy team explains the implications of SFTR, the timetable for its introduction and what the ICMA is doing to help its members with implementation.




SFTR Information Statement

On 13 April 2016 the Association for Financial Markets in Europe (AFME), FIA, the International Capital Market Association (ICMA), the International Swaps and Derivatives Association, Inc. (ISDA) and the International Securities Lending Association (ISLA) jointly published a statement to help market participants comply with new requirements under the European Union’s Securities Financing Transaction Regulation (SFTR).

View the press release.
View the information statement (updated 13 May 2016).

This page displays the most up-to-date version of the work in progress best practice documents put together by the SFTR Task Force.

You will need your ICMA log-in details to access this page. If you are having difficulties accessing this content please contact membership@icmagroup.org.

Access the SFTR Task Force Resource Area