As 2019 comes to an end it is time for us to have a look back at what happened regarding the various regulations. We also want to take this opportunity to give you an outlook on the upcoming year 2020.
Certainly, one of the most discussed topics in 2019 – and most probably also in 2020 – is and will continue to be the Securities Financing Transactions Regulation (SFTR).
The reporting obligations under SFTR will start for the credit institutions and investment firms in only a little bit more than three months.
In 2019, a lot of things happened around SFTR:
The final technical Standards (Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS)) for SFTR have been published in the Official Journal on March 22nd, 2019 and entered into force on April 11th, 2019.
Various working groups on national and European levels have been founded in order to overcome certain unclarities and issues with the reporting data and to represent the market participants in various consultations.
ESMA launched various consultations and open hearings, published various statements and Q&As, and several draft versions of the ISO 20022 XML-Messages have been published, etc.
However, there are still some open points, which we hoped that they would have already been resolved up until now:
- Unfortunately, the last ESMA guidelines are still missing only three months before the reporting start date, which is a major concern for the in-scope market participants (Credit institutions and investment firms).
- Most of the Trade Repositories are still working on a full test environment that allows end-to-end testing.
- The final Messages have been registered with ISO only a few days ago (November 29,2019) and still needs to be implemented by the TRs.
Lately, we have been informed that the Regulatory Reporting Hub (RRH) of Deutsche Börse (DB) will, against previous announcements, not offer a SFTR reporting solution. This means that all the DB members that were hoping and expecting to get a fully automated reporting service from the RRH for the SFTs executed on the Deutsche Börse platform, will have to find a new partner that supports them with their reporting obligation only a few months before the reporting go-live.
However, what we actually see is, that a lot of financial institutions are still not as prepared in their SFTR projects as they should be at this point in time.
If you have not yet decided on a solution provider or if you still need assistance with the implementation of your reporting processes or are looking for automation, please do not hesitate to contact us.
We are more than happy to support you with the implementation of a straightforward and robust automated reporting process.
Also, under the European Market Infrastructure Regulation (EMIR) a lot of things happened in 2019.
Certainly, the most significant change under EMIR was the entry into force of EMIR REFIT on June 17th, 2019. Under the so-called REFIT programme a lot of changes in regards to the clearing obligation and the reporting have been introduced.
As of June 17th, 2020, non-financial counterparties under the clearing thresholds that trade with financial counterparties will not have any reporting obligation anymore. As of this date the financial counterparties will have to report on behalf of the non-financial counterparties and the timely and accurate reporting will be under their sole responsibility.
Intra-group transactions will not be reportable anymore if at least one of the counterparties is classified as non-financial counterparty.
However, beside the changes under REFIT that will have significant impact on the market as of next year, there have also been changes in EMIR that are already in force. Since the beginning of last week, the Trade Repositories perform reconciliations on position-level reports. This might first sound trivial as it doesn’t change anything to the reporting logic. However, position reporting was not mandatory in the past and as these reports have not been reconciled, most of the market participants have not exchanged unique-trade identifiers (UTIs) for position reports. As of now, market participants will have to exchange position-level UTIs which means that processes to exchange those UTIs must be put in place urgently. Knowing about the data quality issues which still exists under EMIR, we expect another drop of the reconciliation statistics due to this new and unexpected requirement.
Beside these already decided changes, some information about the future introduction of an ISO 20022 Standard for EMIR reporting have become public. After the non-financial counterparties and the intra-group transactions have been exempt from the reporting obligation, it is expected that this ISO 20022 Standard will be mandatorily introduced for EMIR reporting too. The expectation is that this reporting standard will come into force late 2020 or beginning of 2021 and will change the reporting logic significantly, especially for smaller financial counterparties not having too much experience with ISO Standards.
All the above changes are related with the ambitions of the European Securities and Markets Authority (ESMA) and the National Competent Authorities (NCAs) to improve the data quality in EMIR reporting. In multiple publications of ESMA and the NCAs during 2019 it has been made clear, that even after 6 years of EMIR being in force the authorities are still not satisfied with the reported data quality.
The main focus of the authorities in this and the next year was and will be the rejection and reconciliations statistics as well as the oversight processes when delegating the reporting.
Market participants should therefore continue focusing on the data quality and should introduce and continuously improve active reconciliation processes.
SFTR and EMIR were not the only regulations for which 2019 was an eventful year. Under various regulations like MiFIR/MiFID II, REMIT, along with the Central Securities Depositories Regulation (CSDR) and the Market Abuse Regulation (MAR), etc. we saw a flood of publications and consultations, which makes it extremely challenging to follow all those changes. For us as dedicated specialists in regulatory reporting it is a very challenging task but for market participants being impacted from various regulations and in various business areas it is nearly impossible to manage this in a cost-, resource- and time-efficient way.
2019 and an outlook into 2020 for deltaconX
2019 was a very eventful and successful year for our company. We have been able to convince several new customers from our multi-regulatory platform and have been able to partner with some of the most precious system vendors in the financial industry.
We are very proud that we were able to conclude our partnerships with Finastra, SimCorp, KRM22 and Murex during 2019 and are looking forward to supporting many more market participants with our state-of-the-art regulatory platform in the upcoming years. Our company has grown significantly throughout 2019 and we are very confident that we can continue this trend in the upcoming year.
We are looking forward to continuing our good cooperation or starting a new relationship with you in 2020.
On behalf of the entire deltaconX team, we wish you, your colleagues and your families a very joyful festive season, good health, happiness and prosperity in 2020.
For more information please contact us at firstname.lastname@example.org .