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ESMA consults on Securities Financing Transaction Regulation

The European Securities and Markets Authority (ESMA) has issued today a Discussion Paper (DP) on rules under the Securities Financing Transaction Regulation (SFTR). 

The SFTR, published in December 2015, is the European Union’s response to the global initiative to bring more transparency to shadow banking activities. The new rules on transparency require both financial and non-financial market participants to report details of their securities financing transactions. Details to be reported include the composition of the collateral, whether the collateral is available for reuse or has been reused, the substitution of collateral at the end of the day and the haircuts applied.

The DP sets out proposals for implementing the reporting framework under the SFTR, including tables of the fields with the proposed data to be reported, and the registration requirements for those Trade Repositories (TRs) which want to accept reports on security financing transactions.

In line with the SFTR requirement to build on pre-existing infrastructures, operational processes and formats which have been introduced with regard to reporting derivative contracts to trade repositories, ESMA has developed its proposals by building on its experience with EMIR and other EU-wide reporting regimes in order to align reporting standards to the extent possible.

ESMA is seeking feedback from all stakeholders, in particular, from entities active in the repo, securities lending/borrowing and commodities lending/borrowing markets. It also particularly welcomes feedback from persons carrying out buy/sell-back and margin lending, TRs, central counterparties (CCPs) and central securities depositories (CSDs).  

Next steps

The consultation closes on 22 April 2016. ESMA will use the responses to its DP to develop detailed rules on which it will publish a follow-up consultation in the second half of 2016. ESMA shall send its draft rules for approval to the European Commission by 13 January 2017.