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What you need to know about the new Securities Financing Transaction Regulation

Author

Listed:
  • Tiller, Hagen
  • Roussos, Andreas

Abstract

After the most recent economic recession in 2008– 2009, the European financial market has seen a great deal of regulatory changes. These changes have significantly impacted how firms, entities and counterparties operate and manage securities as well as manage and report transactions. In addition to the European Market Infrastructure Regulation (EMIR), the Markets in Financial Instruments Directive1 (MiFID II, 2014/65) and the Markets in Financial Instruments Regulation2 (MiFIR, 600/2014) entered into force. Securities Financing Transaction Regulation (SFTR), the newest regulatory change, aims to increase transparency by requiring all entities to report the specifics of their securities financing transactions (SFTs) to an approved European Union (EU) trade repository (TR). While the rules for these reports have not yet been officially finalised (at the time of this writing), these new rules will present a number of challenges to firms, entities, counterparties, TRs and investment companies. From data fragmentation to new costs related to disclosure requirements, all entities and counterparties will be required to adapt to these new obstacles sooner rather than later in order to be prepared for the planned start date in 2019. Furthermore, pending finalisation of the SFTR, all repos, securities loans, buy and sell back, total return swaps and similar transactions will need to be declared to an EU TR. Both financial and nonfinancial counterparties will be subject to these requirements. Aside from the challenges that the new SFTR regulation will likely impact firms, branches, entities, institutions, repositories and so on, there are also a number of basic solutions that can be utilised to mitigate challenges and risks and also successfully satisfy the new reporting requirements. This paper addresses the scope of SFTR, the overall impact, the challenges and even solutions to help entities and counterparties prepare for SFTR to go into force.

Suggested Citation

  • Tiller, Hagen & Roussos, Andreas, 2018. "What you need to know about the new Securities Financing Transaction Regulation," Journal of Securities Operations & Custody, Henry Stewart Publications, vol. 11(1), pages 14-25, December.
    • Handle: RePEc:aza:jsoc00:y:2018:v:11:i:1:p:14-25
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    More about this item

    Keywords

    SFTR; MiFID II; EMIR; transaction reporting; trade data; data reconciliation;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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