The European Securities and Markets Authority (ESMA) has announced regulatory forbearance for banks and investment firms subject to the upcoming reporting obligation under the Securities Financing Transaction Regulation (SFTR). The SFTR requires all securities financing transactions (SFTs) to be reported to EU-recognized trade repositories. SFTs involve the use of securities to borrow cash or other high investment-grade securities and include repurchase transactions, securities lending and sell/buy backs. The reports must include details on the composition of collateral, whether collateral is available for reuse or has been reused, the substitution of collateral and any haircuts applied. The reporting obligation applies to Financial Counterparties (FCs) and Non-Financial Counterparties (NFCs), and relevant third-country entities. For non-EU entities, SFTR will not apply to require reporting directly. However, EU counterparties of in-scope transactions to non-EU entities will need to report. There are certain exceptions for counterparties such as central banks and similar bodies. The table in the annex to this note sets out the applicable counterparties.
Compliments of Shearman & Sterling LLP – a member of the EACCNY.