SFTR

Phase-in of the reporting obligation for securities financing transactions (SFTs) will commence from April 2020.

The reporting obligation will be phased-in as follows¹:

As well as applying to SFTs concluded on or after the applicable phase-in date, there is an obligation to “backload” certain SFTs entered into prior to the phase-in date that remain outstanding on that date and:

• have a remaining maturity on the phase-in date exceeding 180 days; or

• have an open maturity and remain outstanding 180 days after the phase-in date.

Backloaded SFTs must be reported within 190 days of the relevant phase-in date.

Generally, each counterparty to the transaction, once phased-in for reporting, is required to report the details of the relevant SFT. There are, however, a number of exceptions:

• under Article 4 of the SFTR, where a transaction is entered into between a financial counterparty and a non-financial counterparty that is an SME (NFC-SME), the financial counterparty is responsible for reporting on behalf of the NFC-SME as well. NFC-SMEs are small non-financial counterparties which, on their balance sheet dates, fall below at least two of the following thresholds:

- Balance sheet total: €20,000,000
- Net turnover: €40,000,000
- Average number of employees during financial year: 250

• the reporting obligation for SFTs entered into by both UCITS and AIFs also falls on the UCITS manager and AIFM, respectively;

• counterparties may choose to delegate the reporting obligation but will retain responsibility for complying with that obligation.

AFME, FIA, ICMA, ISDA and ISLA have jointly published a new Master Regulatory Reporting Agreement (MRRA). The MRRA sets out common terms for both mandatory and delegated reporting of SFTs under the SFTR as well as derivatives transactions reported under EMIR and is intended to simplify reporting across these different EU regulatory regimes.

ESMA recently published its Final Report assessing the feedback received on its draft Guidelines for reporting under Articles 4 and 12 of SFTR, together with the final version of the Guidelines which aim to clarify certain provisions of SFTR and provide practical guidance on implementation of reporting under SFTR. For more information, please see our client note Reporting under SFTR – ESMA guidelines finalised.

^{1 Note that, as a technical matter, the date on which the reporting obligation applies will in fact be the 11th day of each month specified. However, as certain of these dates fall on non-business days, in practice the reporting go live dates will be as shown above.}