SFTR goes live today
12 January 2016 Brussels
Image: Shutterstock
New European rules demanding greater transparency and more comprehensive reporting requirements for securities financing transactions (SFTs) will come into effect today.
The Securities Financing Transactions Regulation (SFTR) ((EU) 2015/2365), which was published in the Official Journal of the EU today, creates a framework under which details of SFTs can be more efficiently reported to trade repositories.
The guidelines also introduce a new collateral management conditions.
The three main features include the introduction of mandatory reporting for all SFTs, excluding those concluded with central banks, to trade repositories.
Reporting requirements will be implemented at a regional level between 12 to 21 months after the SFTR comes into force.
Investment funds must also disclose information on the use of SFTs and total return swaps to investors in their regular reports and in their pre-contractual documents.
This rules comes into immediate effect with the SFTR but existing funds will receive an 18-month grace period to amend their books.
Finally, the SFTR sets minimum transparency conditions on the reuse of collateral. Disclosure of risks and the need to grant prior consent are just some examples of what the new regulation entails.
The collateral management conditions will come into force six months after the launch of SFTR.
The new regulation comes in response to claims that the extensive reform of the traditional banking sector, without equivalent rules for shadow banking entities, would drive business towards these less regulated areas and subsequently cause a less transparent environment than before the crash.
Both financial and non-financial entities will be affected by these requirements.
Transactions with members of the European System of Central Banks are exempt from the obligation to report SFTs to trade repositories.
The Securities Financing Transactions Regulation (SFTR) ((EU) 2015/2365), which was published in the Official Journal of the EU today, creates a framework under which details of SFTs can be more efficiently reported to trade repositories.
The guidelines also introduce a new collateral management conditions.
The three main features include the introduction of mandatory reporting for all SFTs, excluding those concluded with central banks, to trade repositories.
Reporting requirements will be implemented at a regional level between 12 to 21 months after the SFTR comes into force.
Investment funds must also disclose information on the use of SFTs and total return swaps to investors in their regular reports and in their pre-contractual documents.
This rules comes into immediate effect with the SFTR but existing funds will receive an 18-month grace period to amend their books.
Finally, the SFTR sets minimum transparency conditions on the reuse of collateral. Disclosure of risks and the need to grant prior consent are just some examples of what the new regulation entails.
The collateral management conditions will come into force six months after the launch of SFTR.
The new regulation comes in response to claims that the extensive reform of the traditional banking sector, without equivalent rules for shadow banking entities, would drive business towards these less regulated areas and subsequently cause a less transparent environment than before the crash.
Both financial and non-financial entities will be affected by these requirements.
Transactions with members of the European System of Central Banks are exempt from the obligation to report SFTs to trade repositories.
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