The FCA recently published a quarterly consultation paper (No 34) in which they propose to completely exclude securities financing transactions (SFTs) from any MiFIR transaction reporting obligations under RTS 22. In particular, at present, while SFTs facing the Bank of England or a European System of Central Banks (ESCB) member as ‘Other counterparty’, are excluded from SFTR reporting, they are required to be transaction reported under UK MiFIR. The proposal is for the requirement to report these transactions under UK MiFIR to cease, with effect from 31 March 2022.
The industry will be very grateful for this very sensible change. At present the requirement to provide MiFIR reports on central bank SFT transactions is very much a case of trying to push a round peg into a square hole. The MiFIR taxonomy is wholly inappropriate for reporting SFTs, with very little guidance available. The resultant MiFIR reports appear sufficiently meaningless as to add no apparent value to regulators. This proposed change comes alongside the FCA’s earlier removal of the obligation to report SFTs executed by non-financial counterparties. The additional move to eliminate all MiFIR SFT reporting demonstrates further pragmatism in keeping UK SFTR equivalent to the EU regime while listening to the industry’s operational concerns and taking a more pragmatic approach.
Comments are to be sent to FCA by 17 January 2022.