Securities Financing Transaction Reporting (SFTR)

In January 2020 the new SFTR reporting obligations will come into effect. The size of SFTR is such that people in the market already call it 'the beast'. DEX Data Explorers launches DEX Regulatory Suite for SFTR. This article explains what SFTR entails, and what DEX Data Explorers can do for you to tackle this large regulation.

With the coming into force of SFTR in January 2020, market participants are required to report to Trade Repositories all data pertaining to the securities financing transactions. In particular, reporting is related to Buy Sell Back, Repurchase, Securities Lending and Margin Lending transactions. All data collected collected by the Trade Repositiores will be made available to the National Competent Authorities, a certain subset of the collected data will be made publically available. Based on the large volumes of data as well as the number and range of institutions that will generate and submit data, the use of a single reporting standard has been decided, which will support and aid high levels of automation and data distribution.

The introduction of SFTR has this timeline.

sftrtimeline

 

Participants in the SFTR process

The following participants have been defined in the SFTR process:

  • Reporting entity - any entity that has to report under the scope of SFT Regulation. This data is reported directly to Trade repositories.
  • Trade repository - a Trade repository collects data on the SFT and provides it to the Competent authority
  • Competent authority - a competent authority will have access to the Trade Repositories System and will use it in order to query and receive Trade repositories’ data. 
  • Supervisory authority - entity which collects, validates and performs all relevant message related operations including tracking on time / late submissions. In SFTR ESMA is the Supervisory authority.

The following diagram shows the flow of information between the different participants in the SFTR process.

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SFTR processes

SFTR defines the following information exchange processes:

Reporting entity to/from Trade repository reporting – this process covers the following activities:

  • generating the relevant SFT reports by the counterparties and subsequent reporting to the Trade repository
  • provision of validation feedback by the Trade repository to the Reporting entity
  • provision of reconciliation feedback by the Trade repository to the Reporting entity, reporting counterparties and entities responsible for reporting, as applicable
  • at the end of the day, provision, by the Trade repository to Reporting entity, of all of the data submitted to and generated by the Trade repositoryTrade repository to Trade repository reporting/data exchange – this process covers the following activities:
  • pairing and matching of the SFT reports collected by the same Trade repository, i.e. intra-trade repository reconciliation
  • pairing and matching of the SFT reports collected by different Trade repositories, i.e. inter-trade repository reconciliation

Trade repository provision to authorities – this process covers:

  • provision of the reported SFT and calculated position data
  • provision of the Trade State Report of Outstanding Trades
  • provision of the list of submitted but rejected SFTs, including rejections reasons
  • provision of the SFT’ reconciliation results. Additionally to the detailed information on the failed reconciliation status, a weekly delta shall be generated by the Trade repository and an aggregated information indicating top five fields, per each Reporting entity, which failed the reconciliation

Trade repository data publishing – this process covers publication of the weekly SFT aggregates

 

SFTR messages

To support the SFTR processes several groups of ISO 20022 messages have been defined.

Security Finance Transaction reports - The SFT messages are used by the reporting firm to report the details of the conducted transactions to the trade repositories and by trade repositories to report information on transactions to competent authorities:

  • auth.052 – TransactionReport, 3028 fields
  • auth.071 – TransactionReusedCollateralDataReport, 117 fields
  • auth.070 – TransactionMarginDataReport, 93 fields
  • auth.079 – TransactionStateReport, 13 fields
  • auth.085 – MarginDataTransactionStateReport, 468 fields
  • auth.086 – ReusedCollateralDataTransactionStateReport, 954 fields
  • auth.084 – TransactionStatusAdvice, 13 fields

Reconciliation messages - The reconciliation messages are used to support the process of reconciliation conducted by the trade repositories:

  • auth.083 – MissingCollateralRequest, 36 fields
  • auth.078 – PairingRequest, 40 fields
  • auth.080 – ReconciliationStatusAdvice, 37 fields

Data request - the query reports are used by the competent authorities to submit a data request to the trade repositories:

  • auth.094 – SecuritiesFinancingReportingTransactionQuery, 73 fields

Reporting submitting entities will have to be able to send in messages auth.052, auth.071 and auth.070 on a daily basis, and must be able to process these same messages on a daily basis.

 

DEX Regulatory Suite for SFTR

In order to support the SFTR process DEX Data Explorers offers DEX Regulatory Suite for SFTR. DEX RS generates regulatory reports using the ESMA specifications.

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DEX Regulatory Suite for SFTR generates the XML messages that are used in the SFR processes. These XML messages are based on the same ISO 20022 message standards that also are used for MIFID II transaction reporting.

DEX Regulatory Suite offers the following functionality for Reporting entities:

  • Reports generated according to the latest standards
  • Analysis tools for mapping of own data sets with the ESMA model
  • Validation of the data according to the validation rules defined by ESMA; this gives you the possibility of validating the reports before you send them in
  • XML generation in accordance with the standards of ESMA
  • Processing of the feedback of Trade repositories
  • Automatically generated documentation
  • Workflow support

DEX Data Explorers also has a solution for trade repositories, this will be discussed in a separate post.

 

Workflow support

DEX RS offers workflow integration. The DEX RS functionality has been integrated with workflow systems. Users are guided through the regulatory process; manual steps are integrated with automated steps. All actions are logged. Below the process for a Reporting entity is shown. 

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Reports according to the regulatory standards

DEX RS generates statutory reports based on the latest guidelines provided by the regulator. Therefore, the reports are always compliant and conform the latest standards. Below a transaction report is shown. DEX Data Explorers maintains the definitions of the reports according to the standards. When updates to the standards are submitted, you as a customer will receive an update on the set of reporting definitions.

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DEX RS gives additional information about the displayed data using the ESMA input. Detailed information is given on the results of the validation rules so that errors can easily be analyzed. This helps you in checking your reports and achieving the highest quality in reporting.

 

Design your own reports

On top of delivering the required regulatory reports DEX RS offers you the possibility of designing you own reports. This way you can reuse the data you use for regulatory reports for e.g. internal reports. You can also add your own validations.

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Available solutions

DEX Regulatory Suite supports the following regulations:

  • CRD iv (COREP, FINREP, Funding Plans, Asset Encumbrance, Supervisory Benchmarking Portfolio)
  • AnaCredit
  • Residential Real Estate
  • Deposit Guarantee Scheme
  • MIFID ii
  • SFTR
  • Social Economic Reports
  • Dutch Digital Reporting (DRA)
  • Solvency
  • Country Risk
  • Financial Assessment Scheme (FTK)
  • Tax reporting (VIA)

 

Addition Knowledge House and DEX Regulatory Suite

Addition Knowledge House (www.addition.nu) is a reseller of DEX Regulatory Suite. Addition Knowledge House delivers the following services with regards to DEX Regulatory Suite:

  • implementation support
  • maintenance
  • business process outsourcing