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Relief Over SFTR Alignment Following Treasury Statement

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The UK Treasury released a statement last week confirming plans to align post-Brexit legislation with the EU’s Securities Financing Transactions Regulation (SFTR), the first phase reporting requirements of which are due to come into force in July, 2020 (delayed from the original 13 April deadline to to COVID-19 pressures).

The regulation requires firms to report securities financing transactions (SFTs) to a recognised trading repository. It brings with it a mammoth reporting task for firms in scope – from daily margin-lending transactions to disclosure obligations and collateral updates and valuations – making it one of the biggest data management challenges within the regulatory calendar.

The Treasury previously made The Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018, helping enable Trade Repositories to be registered to operate in the UK post-Transition Period in relation to functions established by the European Market Infrastructure Regulation.

On 30 April, it committed to bringing forward similar legislation before the end of the Transition Period, allowing Trade Repositories to register with the FCA or apply in advance to operate in the UK immediately following the UK’s formal departure from the EU, under a UK SFTR regime, in a move that has brought relief to an industry currently grappling with multiple uncertainties.  

“What would happen if, in the event of not aligning to SFTR, there is no obligation for a UK issuer to provide an LEI? If the issuer is following different rules the LEI could go missing as there would be no legal obligation to provide it. Getting hold of this insight would require shifting through a huge amount of complex data just to work out who the owner is of the information,” asks Heiko Stuber, Senior Product Manager at SIX Group, operator of Switzerland’s principle stock exchange, speaking to RegTech Insight.

“Given the longstanding reporting shortcomings in the securities market, it is easy to see why the UK wants to deploy SFTR rules post the transition period. SFTR is the crucial missing piece in a complex regulatory jigsaw market participants have been piecing together since 2008. It would, therefore, be slightly odd if Europe’s biggest financial centre was not aligned to the regime.”

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