Collaborative reporting expected to be in demand for SFTR

There is likely to be a high demand for collaborative reporting –  and other forms of delegated reporting – under SFTR, according to the results of our recent webinar with UnaVista. In this blog, we cover the results of the three polling questions asked during the webinar and what they mean for the industry.

Q: About which of these are you the most concerned with regards to cleared trade reporting?

  1. Timelines of data from the CCP (25%)
  2. Market data availability (20%)
  3. Matching tolerances on collateral valuations (32%)
  4. Accuracy of Margin Reporting (11%)
  5. Correct application of RTNs (11%)

Cleared trades are by nature significantly more likely to be consistently booked and subsequently reported. The benefits of clearing in counterparty risk reduction and in providing a single data set for many of the reporting fields seems likely to outweigh a number of concerns about the availability of data from CCPs. Nevertheless, pricing anomalies (resulting in concerns by 32% of participants about matching tolerances on collateral valuations) are common among SFT market participants even across different lines of the same business and these differences are likely to promote standardisation, best practices and efficiencies going forward.

Q: Do you use any form of delegated reporting for other regulatory reporting regimes?

  1. Yes, we use delegated reporting for other regimes (e.g. MiFIR or EMIR) (55%)
  2. No, we have never used delegated reporting (32%)
  3. We have only used assisted reporting (14%)

Again, interesting to see that 69% of participants use (or claim to use) some form of delegation. It adds weight to the recommendation that these parties focus on the quality of reporting to ensure that they are compliant with the regulation and keeping their reporting counterparty under appropriate scrutiny regarding the service provided.

Q: How comfortable are you offering optional delegated reporting for SFTR?

  1. Entirely comfortable; this is a mature service for other regimes that we will simply extend to SFTR (37%)
  2. Will reluctantly offer; due to commercial pressures from client dictate we must offer it (23%)
  3. Will offer but not full delegation (7%)
  4. Will not offer any delegated reporting (33%)

The proportion of participants that stated they were “entirely comfortable” was surprising, particularly given the challenges associated with populating the re-use table for third parties. The “will offer but not full delegation,” option seems more likely where clients use facilities offered by the trade repositories to provide a mirror of the broker dealer’s report to enable ease of reporting but only 7% responded in this way. The 33% stating they will not offer any delegated reporting maybe a little misleading given the mixed nature of participants (both buy-side and sell-side) and the commercial pressures that are likely to fall as reporting deadlines approach.

In practice, to offer some form of delegated reporting under SFTR is likely to prove a must-do commercially on the sell-side but few operations managers will take it on with much enthusiasm (or resource). We think both parties should be focussed on data quality. The client should ensure that they are meeting their legal obligations (over the completeness, accuracy and timeliness of their reporting – that they cannot delegate). The reporting party should ensure that reports are correct (for both parties) and they do not only meet the trade repository validation, pairing and matching requirements. Two wrongs after all do not make a right! 

If you’d like support with your SFTR preparation, we can help. Led by our SFTR Reporting Specialist Jonathan Lee, our pre go-live services include programme design and implementation, development of an appropriate controls environment, pre go-live testing of your reporting data and training on the reporting requirements.  Please contact us to find out more or visit our SFTR reporting page for more details.