DTCC Paper Says SFTR Reporting Volume Could Be Five Times Number of Trades

A paper on the impact of the Securities Financing Transactions Regulation (SFTR) reveals that transaction reporting for securities financing trades may create five times as many reports as trades when the regulation takes effect, which is expected in early 2020. The paper was jointly published by The Depository Trust & Clearing Corporation (DTCC) and its consultancy partner The Field Effect. The paper also highlights that SFTR is likely to significantly impact trade booking models and affect 60% of current processes resulting in the need to develop new processes. Furthermore, the new regime may create changes to sources of collateral supply within the market. The industry will need to make provisions to ensure that unintended consequences do not result in collateral supply and liquidity issues. SFTR is part of the European Union’s approach to meeting objectives set out by the Financial Stability Board (FSB) to increase transparency in the use of securities lending and repurchase transactions (repos). The regulation will soon require firms to report their securities financing transactions to an authorized trade repository registered by the European Securities and Markets Authority (ESMA). While some firms have already begun preparing for the implementation in Europe, due to the global nature of the requirements, firms in other jurisdictions should be aware that similar mandates may be implemented to meet the FSB’s objectives.