A large portion of the market is yet to choose systems for Securities Financing Transactions Regulations (SFTR) compliance due to uneasiness around interpretations of the rules, according to Herve Carrere, director of post trade product management at Finastra.
“We can see that several firms are still in the phase of considering choosing a system, or to fund inhouse development,” says Carrere. “From that perspective, we can imagine that people will already be at the very last, and you can also imagine that the first couple of months will be a bit hectic because there will be different types of interpretations for some fields.”
“It is a bit late - if you consider the complexity of what they have to do because the number of fields is very high, 163 versus 129 when you consider Emir - because there are also specificities around the instruments that you need to report which will raise some questions, and we are just at the beginning finally of the implementation or even the selection of the system.”
Under SFTR, market participants must submit daily reports with data on every new trade, amendment, correction, cancellation, collateral valuations, and numerous other fields.
On September 5, Finastra announced the launch of a cloud-based SFTR reporting service. The service will allow firms to collect and check transaction information from banks’ own or third-party systems. Finastra will be testing their SFTR service with test accounts in September starting with Regis-TR.
On April 11, 2020 credit institutions, investment firms, and relevant third country firms will be expected to comply with the transaction reporting obligation.
But significant questions around the rules need to be addressed, says Carrere.
“What is the level of the collateral you need to report when you are talking about pooling transactions?” he says. “What is the time stamp of the transaction? Because when the transaction is not an electronic transaction but a bi-lateral off-platform transaction there is no execution time stamp but still it is a mandatory field. What is the common understanding of what this time stamp would be? And also, what it will mean when you reconcile your view of the transaction with a counterparty view?
For Finatra a cloud based reporting system is a natural fit for SFTR.
“We realised that most of the [trade reporting] solutions are completely fragmented. So, there is no data consolidation and there is no simple centralised place where people can in a simple way monitor what they send to the regulator and what the quality of the data is like,” says Carrere.
“I think we are reaching a point in the regulation where it is not possible anymore to consider on-premise deployment. It’s really too costly and also, it’s too fragmented. SFTR is definitely the opportunity to move to something that is more rationalised.”