SFTR – Transaction Reporting
Phase 1: Investments Firms & Credit Institutions
(11 July 2020)
Phase 2: CCPs & CSDs
(11 July 2020)
Phase 3: Other Financial Counterparties
(11 Oct 2020)
Phase 4: Non Financial Counterparties
(11 Jan 2021)
(See FAQ 6 for further detail on counterparty classification)
In terms of products, Repurchase Agreements, Securities Borrowing and Lending, Buy Sell Backs, and Margin Lending (in relation to Prime Brokerage business) are in scope for SFTR. There is a total of 155 data fields to be reported, however combinations will be dependent on product and report action type.
Please see our FAQs below for further information on SFTR transaction reporting
SFTR FAQs (as at August 2020 )
SFTR FAQs (as at August 2020 )
Securities Financing Transactions Regulation (SFTR) is a European Union (EU) regulation which was introduced with the aim of reducing systemic risk in the Securities Financing Transaction (SFT) market by increasing transparency and surveillance.
Transaction reporting is a key part of the SFTR requirements and, in scope and content, is broadly aligned with EMIR transaction reporting (which applies in respect of derivative transactions).
SFTR transaction reporting has a wide industry scope in that it applies to both financial and non-financial counterparties, and generally, both sides of any transaction are required to be reported (ie it isn't a dealer-only style obligation) (see FAQ 10 for the exceptions to this rule).
There is a phased go-live for SFTR transaction reporting, Phase 1 and 2 counterparties (primarily dealers, CCPs and CSDs) came into scope as of 11 July 2020.
The SFTR reporting obligation is phased in as follows:.
- Phase 1: Investment firms and credit institutions (11 July 2020)
- Phase 2: Central counterparties (CCPs) and central securities depositories (CSDs) (11 July 2020)
- Phase 3: Other financial counterparties – i.e. Insurance, UCITS, AIF, pension funds (11 October 2020)
- Phase 4: Non-financial counterparties (NFCs) (11 January 2021)
The following products are in scope of SFTR:
a) repurchase transaction;
b) securities or commodities lending and securities or commodities borrowing;
c) buy-sell back transaction or sell-buy back transaction; or
d) margin lending transaction, related to prime brokerage activity
SFTR transaction reporting applies to all counterparties that are established:
- in the EU, including all its branches irrespective of where they are located; or
- in a third country, if the SFT is concluded in the course of the operations of a branch of that entity in the EU
Even if you do not fall into scope directly, if your counterparty does, you will need to provide them your classification for their reporting purposes.
- Transaction reports: both new transactions and life cycle events
- Daily CCP Margin reports - reports to provide changes in initial and variation margin that a reporting counterparty posts with regards to CCP-cleared SFTs.
- Daily Collateral Re-use reports - reporting of the changes in the reuse of collateral, the reinvestment of cash or the margin lending funding sources.
It is key that all entities determine their SFTR classification and communicate this to their counterparties in order to facilitate timely and accurate market-wide SFTR reporting.
What is your SFTR Classification?
Financial Counterparty (FC) – You will be an FC if you are an authorised investment firm; credit institution; insurance undertaking or a reinsurance undertaking; UCITS and, where relevant, its management company; AIF managed by AIFMs; an institution for occupational retirement provision (i.e. pension scheme arrangement); CCP or CSD
Non-Financial Counterparty (NFC) – You will be defined as an NFC if you are an 'undertaking' established in the EU or in a third country and don't fall into the 'financial counterparties' definition
Small Medium Enterprise Non-Financial Counterparty (SME NFC) – You will be an SME NFC if you are a non financial counterparty which does not exceed the limits of at least two of the three following criteria:
(a) balance sheet total: EUR 20 000 000;
(b) net turnover: EUR 40 000 000;
(c) average number of employees during the financial year: 250.
These categories are then used for determining the SFTR Go-Live Phases: Please see FAQ 2 for details
For now, UBS does not consider backloading to be a requirement under SFTR.
ESMA has recently clarified that in relation to the reporting obligations under SFTR, ESMA expects competent authorities not to prioritise their supervisory actions towards counterparties in respect of SFTs subject to the backloading obligation. In interpreting this, ICMA4 and ISLA5 have stated that in effect, this clarification allows all firms subject to SFTR reporting to no longer consider backloading as a requirement. The Financial Conduct Authority has confirmed that it will not prioritise supervision relating to the reporting of SFTs for firms to which the backloading requirement specified in SFTR applies.
Note: all collateral will be reported from the go-live date.
All legal entities subject to SFTR are required to have a Legal Entity Identifier (“LEI”). There are a number of authorised providers of LEIs. Please refer to GLEIF for more information on how to obtain an LEI.
In addition, LEIs will be required for other parties involved in a transaction –
- Counterparties (unless deemed a 'natural person')
- Agent Lenders
- CSD Participants or Indirect Participants
- Triparty Agents
- CCP and Clearing Members
- Security Issuers
Given this, if you don't have an LEI or transact or otherwise interact with anyone of these parties and they don't have an LEI you, or they, will need to obtain one.
In line with industry body recommendations, UBS will reach out to all clients and counterparties individually to pre-agree responsibilities for UTI generation and consumption and obtain confirmation of any decisions in writing.
A counterparty which is subject to the reporting obligation may delegate the reporting of the details of SFTs to another party, who have the capability to report SFTs on behalf of others.
Yes, UBS' delegated reporting offering will be available from 11 October 2020.
The service is available for investment banking clients of UBS AG, London Branch and UBS Europe SE.
No, UBS will not be charging clients that make use of the delegated reporting service.
No, you are able to select the service for one or multiple of the four in-scope product types:
- Repurchase transactions (e.g. repos)
- Securities or commodities lending or borrowing transactions (e.g. SBLs)
- Buy-sell back or sell-buy back transactions
- Margin lending transactions, which is defined broadly to capture any extension of credit in connection with the purchase, sale, carrying or trading of securities.
Delegated reporting arrangements with UBS will (where possible) broadly reflect the provisions of the master regulatory reporting agreement produced by ISDA and other trade associations.
What action do I need to take now as a result of SFTR?
- Where possible, join a trade association / vendor working group to benefit from the SFTR analysis already in progress
- Establish whether each of your legal entities are in scope for SFTR in terms of both products traded and jurisdiction (see FAQs 3 and 4)
- Obtain an Legal Entity Identifier (LEI) for each of your in scope legal entities (see FAQ 8)
- Determine your SFTR classification and communicate to your counterparties (see FAQ 6)
- Determine your SFTR go-live date – your classification will dictate the date on which your SFTR reporting obligation will commence (see FAQ 2)
- Determine your Transaction Reporting solution, i.e. Delegated Reporting, in-house development or transaction reporting via Vendors
- If building in-house choose your SFTR vendor(s) for pre-reconciliation, agent lender disclosure data and UTI generation / sharing
- Sign up to a European Union authorised or registered Trade Repository (if you have not done so already) or ensure you have sufficient delegated reporting arrangements in place
Disclaimer: This document is prepared by UBS AG and/or any of its subsidiaries and/or any of its affiliates ("UBS") for qualifying professional clients or eligible counterparties (as relevant). Products and services in this communication may not be available for residents / institutions of certain jurisdictions. Transactions in foreign securities for the account of a US person must be effected through UBS Securities LLC. This information is not sent to you in connection with any wealth management, corporate or institutional client or asset management relationship you may have with UBS.
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