There are just over six weeks left until the SFTR reporting requirement will come into force. After more than 4 years of preparation, the Securities Financing Transaction Regulation reporting requirement will start on July 13th, 2020:
On May 6th 2020, four trade repositories (DTCC, KDPW, REGIS-TR and UnaVista) received approval from the European Securities and Market Authority (ESMA) for the extension of their license to receive SFTR-relevant transaction data, so nothing now prevents the reporting start in mid-July. Contrary to all speculation, it currently looks like as if the merger of the first two waves will not result in any further postponement of the reporting requirements for wave 3 and 4.
Fund companies, asset managers, insurance companies & reinsurers that engage in securities financing transactions will have to start reporting on October 12th, 2020 without any further postponement. Non-financial counterparties (NFCs) will have to submit SFTR reports from January 11th, 2021.
The COVID-19 pandemic and the associated restrictions on returning to work and coordinated project planning have not made the situation any easier, especially for wave 3 market participants. The increased market volatility and the shortened experience time of credit institutions and investment firms adds further complexity.
Some market participants, especially in the last two waves, are still pursuing the plan to outsource reporting to credit institutions and investment firms, as they are supposed to have more experience with reporting under SFTR. However, the postponement of the first wave limits this additional experience to only a few weeks. Furthermore, wave 3 participants should consider that they can only outsource the reporting process to the credit institutions and investment firms, and not the responsibility for the report’s accuracy and content. Accordingly, these participants who choose to delegate must be able to control whether or not their counterparties submitted correct reports on their behalf. Already under EMIR, some supervisory authorities have criticised that there are not enough active processes implemented by fund companies, asset managers and insurers to exert adequate oversight and effective control over delegated reporting. Effective oversight and control processes are also expected of the delegating institutions under SFTR, but then the cost of ensuring the required degree of ‘effectiveness’ can neutralize, or even outweigh, the obvious advantages of delegation, especially when several counterparties or intermediaries are involved.
We at deltaconX can help you to automate and standardize your reporting flows of various reporting obligations and thus reduce your daily workload. At the same time, you keep full control over all your reported data. If we have aroused your interest, please visit our website www.deltaconx.com or contact us directly.
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