MarketAxess
Sunil Daswani
31 March 2020
With SFTR’s first go-live phase now combined with the second in July, firms have time to get their house in order and should not be complacent, argues MarketAxess
Image: Shutterstock
What is your view on the decision to unofficially move SFTR’s go-live to July?
Any delay is good news as it will give people more time, however, the regulation was initially devised to allow regulators to better understand what goes on in markets, particularly during unprecedented times when increased volatility and market disruption may occur. It is at times like this that regulators are most concerned. Regulation is important in providing transparency and providing regulators with a clear view of what is happening and to identify where potential issues can be avoided. Therefore, a delay is just that, whether now or in three months’ time the Securities Financing Transactions Regulation (SFTR) reporting will commence. We know regulations such as SFTR are here to stay and so it is important we continue to prepare for it and other such similar regulations.
How would you describe the market’s preparedness?
Organisations continue to make strides in the implementation of SFTR, however, testing across the industry has been a challenge due to varying degrees of differences for firms in terms of the phased go-live dates, the asset classes for reporting being impacted, the volumes to report and the size of the organisation. With the recent announcement from the European Securities and Markets Authority (ESMA), the delay will allow now for the much needed additional testing.
What are the key concerns your clients have and how easily are these addressed?
The volume of reporting in terms of transactions and the immense amount of data required per transaction is a key concern for clients.
Clients have spent time selecting vendor solutions, and are not always on the same vendor platform as their counterparties. Where this is the case, the exchange of data needs to be near real time, efficient, easy to access and process. At MarketAxess, our unique trade identifier (UTI) portal is modular and part of the full front-to-back SFTR solution which allows counterparties to do just this – they can receive, send, or do both on the platform no matter what vendor platform they have selected.
With the revised deadline set, do you feel the increased time will enable a smoother introduction of the regulation or would the associations’ preferred choice of October have been better?
The coronavirus has undoubtedly put a strain on firms who go live in April. However, organisations were making positive strides in the implementation of SFTR and this news should help firms maintain preparations amid a difficult climate, and will allow for much needed additional testing.
Any tips for the smooth implementation and running of a business reporting and moving forwards with this regulation?
Firms should continue to build on momentum already started in preparing for SFTR. We would recommend engaging with vendors and selecting early – the sooner firms select, the sooner they can begin testing and identify any potential issues.
Firms should also participate in industry working groups, it’s important to be vocal and this is a key part of working together as an industry, to learn and work together for smooth implementation.
In addition, firms must ensure testing begins as soon as possible between counterparties. The challenge for firms is to consistently report on both sides of the transaction. This means being able to not only generate and share UTIs but also accept them from a counterparty.
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