Repo and Collateral Markets
Repo and Collateral Markets by Andy Hill, Alexander Westphal, Zhan Chen and Lisa Cleary
SFTR implementation
Other ESMA publications
While SFTR reporting has been fully live since January 2021, ICMA’s work with members to improve data quality and address outstanding reporting issues continues. The ERCC’s SFTR Task Force is working through a long list of reporting issues which has been put together based on member feedback and which is shared regularly with ESMA and the FCA. In addition, the detailed ICMA Recommendations for Reporting under SFTR continue to evolve, reflecting discussions within the Task Force but also incorporating new regulatory guidance published by authorities. As trade repository rejections remain low, the focus of the industry work is shifting increasingly to reconciliation challenges and systematic matching breaks. In addition to the regular Task Force meetings, on 30 June ICMA hosted a workshop to run through the most common matching issues and to discuss the scope for further best practice.
On 15 April, ESMA published its first report on data quality under EMIR and SFTR reporting. The report assesses progress made to date in relation to the quality of the data reported under both regimes and highlights areas for improvement, although it only includes limited details on SFTR given the relatively recent reporting start. Going forward this will be an annual review.
Ongoing review of ESMA guidance ESMA is currently reviewing a number of important documents which form part of the SFTR Level 3 guidance, including the SFTR validation rules and the related XML reporting schemas. The review is expected to address a number of pending issues within those documents that are still causing reporting issues. The updated documents are expected to be published in July, and the new rules are due to go live in December or January 2022 following testing with reporting firms and service providers, although the proposed timeline is considered to be challenging. In parallel, ESMA has already submitted proposed changes to the ISO 20022 XML schemas which are currently being reviewed by the relevant ISO SFTR Evaluation Team. ESMA also continues to expand the SFTR Q&As. Since the previous edition of the Quarterly Report, three further questions have been added to the document which now covers 10 topics in total. ICMA is following the process closely and continues to reflect any new guidance in its detailed best practices.
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On 25 May, ESMA published the Final Report on Guidelines on the Calculation of Positions in SFTs by Trade Repositories (TRs). The purpose of the Guidelines is to ensure a uniform methodology under EMIR and SFTR as well as to maintain consistency of position calculations across TRs. This follows an ESMA consultation on the draft Guidelines which ICMA responded to in September last year. The guidelines will apply from 31 January 2022. On 28 May, ESMA launched a consultation on proposed amendments to its Guidelines on data transfer between trade repositories under EMIR, as well as on a set of new Guidelines regarding data transfer between TRs under SFTR. The consultation closes on 27 August 2021 and the related final report will be published by Q1 2022.
UK version of the SFTR Article 15 information statement On 17 May, AFME, FIA, ICMA, ISDA and ISLA jointly published a statement to help market participants comply with requirements under Article 15 of the UK SFTR. The information statement informs users of the general risks and consequences that may be involved in consenting to a right of use of collateral provided under a security collateral arrangement or of concluding a title transfer collateral arrangement (for example, the GMRA). Contact: Alexander Westphal and Zhan Chen alexander.westphal@icmagroup.org zhan.chen@icmagroup.org
