Securities Financing Transaction Regulation (SFTR)

Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 (Securities Financing Transaction Regulation or SFTR) aims among others to increase the transparency of securities financing transactions (SFT).

The regulation applies to all counterparties that use SFT i.e.:

• Repurchase transactions (REPO and reverse REPO);
• Securities or commodities lending and securities or commodities borrowing;
• Buy-sell back or sell-buy back transactions;
• Margin lending transactions.

SFTR introduces new principles for entities dealing with SFTs:

1. Details of SFTs are to be reported for Financial Counterparties (FC) and Non-Financial Counterparties (NFC) to an approved Trade Repository (Article 4 of SFTR);
2. FC and NFC are required to comply with specific rules on reuse of financial instruments received under a collateral arrangement (Article 15 of SFTR);
3. Investment Fund Managers managing funds that use SFTs and total return swaps are required to respond to specific disclosure requirements, in addition to the reporting to TRs as required under point 1, as listed above (Articles 13 and 14 of SFTR).

SFTR obligations are applicable at different moments:

1. Reporting of SFT details are applicable at specific dates depending on the type of entities. The dates are triggered by the entry into force of Commission Delegated Regulation (EU) 2019/356 on 11 April 2019, therefore:
   • As of 14 April 2020 for credit institutions and investment firms;
   • As of 13 July 2020 for central counterparties (CCP) and central security depositories (CSD);
   • As of 12 October 2020 for insurance undertakings or a reinsurance undertakings, UCITS, AIFs, AIFMs and institutions for occupational retirement provision;
   • As of 11 January 2021 for non-financial counterparties.
2. SFTR reuse requirements (Article 15 of SFTR) has been applicable since 13 July 2016;
3. SFTR disclosure requirements for Investment Fund Managers, managing funds that use SFTs and total return swaps (Articles 13 and 14 of SFTR respectively) have been applicable since 31 January 2017 and 13 July 2017, respectively.

Entities Responsible for Reporting where the CSSF is the competent authority shall notify the CSSF in case of:

• Any misreporting caused by flaws in the reporting systems that would affect a significant number of reports.
• Any reporting obstacle preventing the report submitting entity from sending reports to a trade repository within the deadline referred to in Article 4(1) of Regulation (EU) No 2015/2365.
• Any significant issue resulting in reporting errors that would not cause rejection by a trade repository.
• Any other type of rejection.