SFTR: An Operational Game Changer for the Market

Introduction: SFTR Update
Securities Financing Transactions Regulation (SFTR) requirements are expected to be adopted by the European Commission (EC) by Q1 2019. Prior to finalisation, the EC and the European Securities and Markets Authority (ESMA) must resolve some differences over the SFTR level 2 Regulatory Technical Standards (RTS), but no further material changes are expected. Reporting of securities financing transactions (SFTs) to authorised trade repositories (TRs) would then commence in Q1 2020, requiring investment firms to report all new SFT trades; amendments; corrections; life cycle events; and collateral valuations and re-use on a daily
basis.

While firms may be tempted to put SFTR implementation projects on hold pending the EC’s final endorsement of the RTS, the reporting obligations are well known at this point, and TRs will begin rolling out user acceptance testing in 2019 for market participants ahead of the Q1 2020 go-live reporting date. Compliance with SFTR reporting requirements will present a number of operational and data challenges, so firms should begin testing and adopting reporting solutions for SFTs as soon as possible.

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