RMA: Intraday reporting could prove difficult under SFTR
10 October 2018 Miami
Image: Shutterstock
Under the 网爆吃瓜 Finance Transactions Regulation (SFTR), end of day reporting will be manageable, but intraday reporting could prove difficult, according to speakers at the 35th Risk Management Association Conference on 网爆吃瓜 Lending.
One panellist said many things can happen throughout the lifecycle of a trade and all of these issues will have to be reported.
These concerns will 鈥渄rive volume鈥� under the reporting obligation.
Another panellist remarked on the problems that may arise from reporting on a trade that never actually happened. To avoid this, panellists said it would be important to develop ground rules for the regulation.
Industry bodies will need to develop these ground rules soon to ensure firms are prepared for SFTR, and a speaker said that they would like to see the rules adopted because 鈥渘othing will clarify the industry鈥檚 response like a deadline鈥�.
Panellists said this was a 鈥渢all order鈥� for associations and industry bodies, such as the International 网爆吃瓜 Lending Association, which is currently working on guidelines.
鈥淚 think at this point we all agree we aren鈥檛 going to get more clarifications from the regulations. It鈥檚 on the industry to band together and has a consistent approach鈥�, another panellist remarked.
Another concern raised on the panel was the issue of fees for firm鈥檚 using trade repositories (TR).
One speaker who represented a TR said that, first and foremost, it is the 鈥渋ndustry that needs to be taken care of鈥�.
The speaker said: 鈥淭here鈥檚 definitely a lot of concern in the industry on fees. We looked at the way we price under European Market Infrastructures Regulation, which is based on a trade-based UTI.鈥�
鈥淲e questioned if this was a fair model under SFTR, but we don鈥檛 believe it is. We鈥檙e moving to a submission based pricing model, being an industry-owned organisation, we have to effectively provide for costs and a small margin.鈥�
Panellists were also concerned about whether European regulators could amend the regulation if they were to decide that the requirement was 鈥渢oo much鈥�.
While changes are possible, one panellist said it would be difficult to adjust within the first two years, due to EU regulatory constraints within the first two years of implementation.
Speakers also discussed whether, under the reporting requirements, now was a good time to begin using a central counterparty (CCP) structure.
One panellist said the CCP structure was a good idea but warned that if securities lending revenue becomes de minimis, it might result in a shift away from physical lending to synthetic lending.
Finally, panellists discussed SFTR in the context of the Automated Loan Deposit (ALD) requirements.
Speakers observed the similarities between the two reporting requirements and questioned how the SFTR would effect ALD.
One speaker said that the requirements could 鈥渃o-exist in the short to medium term鈥�, but promoted SFTR as providing a 鈥渉igher degree of granularity鈥�.
One panellist said many things can happen throughout the lifecycle of a trade and all of these issues will have to be reported.
These concerns will 鈥渄rive volume鈥� under the reporting obligation.
Another panellist remarked on the problems that may arise from reporting on a trade that never actually happened. To avoid this, panellists said it would be important to develop ground rules for the regulation.
Industry bodies will need to develop these ground rules soon to ensure firms are prepared for SFTR, and a speaker said that they would like to see the rules adopted because 鈥渘othing will clarify the industry鈥檚 response like a deadline鈥�.
Panellists said this was a 鈥渢all order鈥� for associations and industry bodies, such as the International 网爆吃瓜 Lending Association, which is currently working on guidelines.
鈥淚 think at this point we all agree we aren鈥檛 going to get more clarifications from the regulations. It鈥檚 on the industry to band together and has a consistent approach鈥�, another panellist remarked.
Another concern raised on the panel was the issue of fees for firm鈥檚 using trade repositories (TR).
One speaker who represented a TR said that, first and foremost, it is the 鈥渋ndustry that needs to be taken care of鈥�.
The speaker said: 鈥淭here鈥檚 definitely a lot of concern in the industry on fees. We looked at the way we price under European Market Infrastructures Regulation, which is based on a trade-based UTI.鈥�
鈥淲e questioned if this was a fair model under SFTR, but we don鈥檛 believe it is. We鈥檙e moving to a submission based pricing model, being an industry-owned organisation, we have to effectively provide for costs and a small margin.鈥�
Panellists were also concerned about whether European regulators could amend the regulation if they were to decide that the requirement was 鈥渢oo much鈥�.
While changes are possible, one panellist said it would be difficult to adjust within the first two years, due to EU regulatory constraints within the first two years of implementation.
Speakers also discussed whether, under the reporting requirements, now was a good time to begin using a central counterparty (CCP) structure.
One panellist said the CCP structure was a good idea but warned that if securities lending revenue becomes de minimis, it might result in a shift away from physical lending to synthetic lending.
Finally, panellists discussed SFTR in the context of the Automated Loan Deposit (ALD) requirements.
Speakers observed the similarities between the two reporting requirements and questioned how the SFTR would effect ALD.
One speaker said that the requirements could 鈥渃o-exist in the short to medium term鈥�, but promoted SFTR as providing a 鈥渉igher degree of granularity鈥�.
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