[ C O V E R
their regulators – the Bank of England and
Federal Reserve, for example,” he adds.
A focus on data quality
Regulators have collected countless amounts
of data in recent years through widespread
reporting requirements, but now they need
to ensure the data is usable and clean so they
can achieve their goal of further transparen-
cy into the markets.
For market participants, they will be aware
of their own data situation when it comes to
reporting and will know whether it needs to
be improved to avoid disciplinary action.
“The number of major regulatory
implementations on the horizon is
greatly reduced. This has given the
industry some time to absorb the
changes.”
SEAN TUFFY, HEAD OF MARKET AND REGULATORY
INTELLIGENCE, EMEA, CUSTODY & FUND SERVICES, CITI
“One area that firms have used the relative
calm period in regulatory change is report-
ing,” adds Citi’s Tuffy. “Over the last 10 years,
the amount of regulatory reporting require-
ments has dramatically increased in this
space. Often there is overlap between various
reporting requests. However, due to the stag-
gered nature of the regulatory requirements
when these requirements went live, they
were often looked at in isolation. Now we’re
seeing firms take a step back and review their
regulatory reporting obligations to see if they
can take a more holistic approach.”
In terms of ‘taking its toll’ rankings, MiFID
II was certainly up there at the top, along
with Basel III, Dodd-Frank and the amal-
gamation of every reporting rule which has
been introduced. With potential fines on the
horizon, work will undoubtedly still be in
progress on improving data quality, but ulti-
mately when it comes to looking at the cal-
endar, and comparing the current pressures
to the past five years, the second half of 2018
into the beginning of 2019 looks far more re-
laxed. Some experts argue this shouldn’t be
the case though, for one reporting regulation
is on its way which dwarfs all others.
“Securities Financing Transactions Regula-
S T O R Y
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R E G U L AT I O N ]
tion (SFTR) is entering a part of the market
that has to a large extent been in the dark to
this point,” explains Ronan Brennan, chief
product officer at Compliance Solutions
Strategies (CSS).
The purpose of SFTR is to provide greater
transparency on cross-asset class lending,
borrowing, repurchase agreements and sale/
buy-back agreements among counterparties
in the EU.
Dual-threat
Unlike some other parts of the industry,
market participants active in repo and
securities lending markets have not had to
comply with reporting requirements before
when engaging in these activities. It’s been a
lightly regulated space.
Therefore, with an estimated 150 reporting
fields to fill in, the need for unique transac-
tion identifiers (UTI), and dual-sided report-
ing – among others – the challenges will be
vast. The chains involved with the re-use of
the collateral securities in other securities
financing transactions will also add to the
complexity.
“The data set required for reporting is not
one that is necessarily co-located today and
will require a firm to potentially create a
new reporting hub that stitches data togeth-
er from disparate sources and systems that
were not necessarily considered ‘connected’
heretofore,” adds Brennan.
“SFTR requires some very careful under-
standing of security T&Cs as there is a dis-
tinct lack of homogenous ways of structuring
repos, lending and margin set-up.”
“SFTR is entering a part of the market that
has to a large extent been in the dark to this
point.”
RONAN BRENNAN, CHIEF PRODUCT OFFICER,
COMPLIANCE SOLUTIONS STRATEGIES
For those who have been familiar with
EMIR and its relatively relaxed enforcement
procedure, there may be a surprise when the
forbearance from regulators that they have
seen in the past isn’t there for SFTR. Despite
grace periods with the comparable OTC
derivatives reporting requirements back in
2016, one source tells Global Custodian, “the
Fall 2018
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