SFTR Period of Scrutiny Chaos – Where Same Means Different

SFTR Period of Scrutiny Chaos – Where Same Means Different

Confusion reigns over the period of Parliament and Council scrutiny for the recently adopted level II SFTR legislation. Three months or one month?

Earlier this week we broke the news that the European Commission (EC) at long last has adopted SFTR level II legislation.  http://www.securitieslendingtimes.com/securitieslendingnews/article.php?article_id=222662

We also discussed the period of scrutiny and how it should be 3 months. Due to the lead we have taken on SFTR, directly liaising with the European Commission and ESMA, our view and similar voices quickly became the settled industry view: that the period of scrutiny is 3 months.

But is it? In the finest traditions of EU politics, there appears to have been an element of rule-massaging, to put it prosaically.


As has now been established, the EC has made minor changes to the key article 4 RTS and ITS. So by the letter of the law the shorter 1-month scrutiny period should not be available:

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 [1]


It’s not the same. The adjacent screenshot shows that there have indeed been small changes to the RTS and the ITS logic too. I also spoke directly to an official in the European Commission who confirmed that they “had made minor changes where they felt appropriate.”

So by even the loosest reading of the word “same” (we even checked the French version “identique”), the ESMA draft is not the “same” as the EC’s adopted version.


All good. So when they are different, the period of scrutiny is three 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. [1]


So three months it is.

Except it isn’t.

With the help of some cutting-edge technology that we have developed [more on this in Q2 2019], Our eagle-eyed team noticed that the EC had listed the key RTS (available here) as under a 1 month scrutiny period:

We knew the period of scrutiny was the key outstanding question the millisecond the RTSs were released and so directly emailed our contact in the FISMA directorate :

No answer.

The market is under the seemingly false impression that the legislation will achieve legal force on 2 April 2019 and so transaction reporting will commence on or around 2 April 2020.

Yet it appears this is now wrong, according to the EC’s own published information.

So, with a heavy appeal to the festive spirit of giving, will the EC step up and bestow a Christmas gift on the industry and answer the simple question? And if they confirm their published 1 month, then that’s great as a clarification, but a follow up question is: why, given that the adopted legislation while similar is not the “same“?

Has the Parliament or Council written a no-objection letter to the Commission? I doubt it, but I guess it’s possible.

I’d settle into my armchair, sipping warm tea besides the yule log, stroking my cat if the EC could clarify. I don’t think that’s too much to ask for.

Merry Christmas, and please reach out to us. We have consistently taken the lead and broken SFTR stories direct from the source. We can help train your staff and provide consultancy.

[Finally, media firms and service providers are politely requested to link back to this article when using our insights or we will be reluctantly forced to place our research behind a paywall in 2019].


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
2- Consultancy.

Please do contact us via the webform, phone, LinkedIn or email.


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[1] ESMA Founding Regulation Article 13 ( https://eur-lex.europa.eu/eli/reg/2010/1095/oj )


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