Securities Financing Transactions - ESMA Discussion Paper

On March 11th 2016 ESMA published its Discussion Paper on Draft Regulatory Technical Standards and Implementing Technical Standards under the Regulation (EU) 2015/2365 of November 25th 2015 on transparency of securities financing transactions and of reuse (the “Regulation”) (the “Discussion Paper”). This Discussion Paper is published as part of ESMA’s consultations on Level 2 measures under the Regulation and includes 145 questions addressed to all interested stakeholders.

As described in our previous article, the Regulation responds to the need to enhance the transparency of securities financing markets and thus of the financial system. It creates a European Union framework under which (i) details of securities financing transactions (“SFTs”) can be efficiently reported to trade repositories (“TRs”) and (ii) information on SFTs and total return swaps are disclosed to investors in collective investment undertakings.

"The Discussion Paper includes information on the procedure and criteria for registration as a TR which wants to accept reports on SFTs and focuses on the SFTs reporting obligation, providing details on the use of internationally agreed reporting standards, the reporting logic under the Regulation and the main structure of a SFTs report."

Moreover, it covers the requirements regarding transparency of data and aggregation and comparison of data and provides tables of fields for the relevant types of SFTs.

Regarding the disclosure requirements for UCITS and AIFMs as set in the Annex to the Regulation, ESMA states that drafting regulatory standards in order to further specify the contents of the Annex would not be the best approach at this stage. However, ESMA will consider working on this in the future after having monitored developments in market practice.

Finally, regarding the publication of implementing technical standards which will determine the procedures and forms for exchange of information on administrative and criminal sanctions imposed by the competent authorities of Member States, ESMA clarifes that it will publish a consultation paper on this matter at a later stage.

The Discussion Paper is therefore the first big step for the creation of a standardised and detailed reporting framework for SFTs. The Discussion Paper is open for comments until April 22nd 2016. ESMA will consider the feedback received and expects to publish a consultation paper early in Q3 2016. Thereafter, the final report and the draft technical standards will be submitted to the European Commission for endorsement by January 13th 2017.