EU Commission Adopts SFTR Level II…Finally!
The European Commission (EC) at long last adopted SFTR level II legislation today in the form of 7 delegated regulations. [Update 14.Dec: 3 more adopted today.]
We broke the news early this morning on LinkedIn, and it was quickly reported in the press:
So, eighteen months late. Better late than never.
The pertinent questions are:
- What has the EC adopted?
- How long is the period of Parliament and Council scrutiny? 6, 3 or 1 month?
- Are there any differences between ESMA’s draft and the EC’s adopted version?
- When will the first SFTR reports go live?
What has the EC adopted?
- RTS specifying the details of the application for registration as a trade repository;
- Reg. on access to the data held in trade repositories;
- RTS specifying the details of securities financing transactions (SFTs) to be reported to trade repositories (this is the one the vast majority of market participants are interested in);
- Reg. on fees charged by the European Securities and Markets Authority to trade repositories;
- RTS on the collection, verification, aggregation, comparison and publication of data on securities financing transactions (SFTs) by trade repositories;
- RTS on the details of the application for registration and extension of registration as a trade repository;
- RTS on access to details of securities financing transactions (SFTs) held in trade repositories.
[Update 14.Dec: 3 more adopted today]
- ITS regarding the procedures and forms for exchange of information on sanctions, measures and investigations in accordance with Regulation (EU) 2015/2365 of the European Parliament and of the Council;
- ITS regarding the format and frequency of reports on the details of securities financing transactions (SFTs) to trade repositories in accordance with Regulation (EU) 2015/2365 of the European Parliament and of the Council and amending Implementing Regulation (EU) No 1247/2012 with regard to the use of reporting codes in the reporting of derivative contracts [Comment: Important for reporting firms];
- ITS regarding the format of applications for registration and extension of registration of trade repositories in accordance with Regulation (EU) 2015/2365 of the European Parliament and of the Council.
Commission adopts – end of the road?
As we were quoted by Securities Lending Times, the 7 delegated regulations will now be scrutinised by the Parliament and Council for a three month period (renewable once should the Parliament or Council decide; in this event making it six months):
The European Parliament or the Council may object to a regulatory technical standard within a period of 3 months from the date of notification of the regulatory technical standard adopted by the Commission. At the initiative of the European Parliament or the Council that period shall be extended by 3 months.
Where the Commission adopts a regulatory technical standard which is the same as the draft regulatory technical standard submitted by the Authority, the period during which the European Parliament and the Council may object shall be 1 month from the date of notification. At the initiative of the European Parliament or the Council that period shall be extended by 1 month. 
We contacted the EC and they confirmed that they have indeed made minor modifications. Since the EC ammended ESMA’s draft legislation and declined ESMA’s formal opinion, the shorter 1-month scrutiny is not available.
In conclusion, the period of scutiny is 3 months, extendable to 6 months should the Parliament or Council wish. No doubt in the coming days the EC will formally clarify this point – We have asked for a written confirmation of the same.
Differences between ESMA’s draft and the EC’s adopted version
- RTS specifying the details of securities financing transactions (SFTs) to be reported to trade repositories;
We are currently comparing the EC’s adopted version with ESMA’s draft. The below screenshot shows there are minor differences but as of writing we have not noted any significant changes. We will be comparing the field by field Annex with ESMA’s draft to check if any changes crept in under the radar – we do not expect any.
So when is reporting go-live?
Should the Parliament and Council not raise any objections (which we certainly do not expect), the legislation will enter the Official Journal on 13 March achieving legal force 20 days later = on or around 2 April 2019.
The first entities to report will be MiFID II firms and Credit Institutions (banks etc) 12 months later = 2 April 2020.
So pencil in 2 April 2020 as the reporting go-live date.
How can Market FinReg help?
Market FinReg hosted the largest dedicated SFTR conference to be held to date on 5 September in London. A consistent message from all speakers was the necessity to get started immediately and not delay.
We fully endorse this message.
1- We can provide training which we offer in conjunction with Regis-TR – the pan-European Trade Repository and
Please do contact us via the webform, phone, LinkedIn or email.
Our SFTR course is fully endorsed and is available in person or online in a university modular format. View the syllabus here.