La ISLA ESMA, postcards from Madrid and Amsterdam

Data quality in securities financing markets was the focus of the keynote speech by Steven Maijoor, Chair of ESMA, at the 28th ISLA Annual Securities Finance and Collateral Management conference in Madrid on 19 June. The speech was overwhelmingly a call for firms to pull up their socks on data quality in securities financing markets. There were in excess of 60 references to data in the speech. It was fascinating to see a conference dominated by agent lenders, beneficial owners, custodians and clearing houses with such a focus on data and data quality, particularly in the context of Securities Financing Transaction Regulation (SFTR) reporting.

Steven Maijoor presented a series of developments, tools and processes that they hope to “turn data into intelligence for authorities and useful information for the public.” Nevertheless, he sounded some poignant notes of caution stating that while “data has become the fuel of today’s economy”, it is “however a fuel that requires a lot of refining.” He then went on to focus on data standardisation, eliminating duplication or overlapping reporting and streamlining data submission by regulators. While from an industry perspective, he expected the development of a financial data dictionary and the enhancement of internal data capabilities in terms of staff and systems within firms, Maijoor also promoted the use of industry standard identifiers within SFTR such as Legal Entity Identifiers (LEI) and Unique Trade Identifiers (UTI) as tools that help to achieve better quality reporting.        

Fast forward to Amsterdam and the Trade and Transaction Reporting conference on 26th June and ESMA’s Nikolay Arnaudov gave a speech on “SFTR Key aspects, timeline and challenges.” We are very pleased to see how SFTR guidance and consultations are evolving as the final requirements fully shape up. Indications are that the guidance notes are not intended to change any of the RTS or ITS or bring forward any reporting requirements but simply to provide further clarity around reportable activities and exclusions (such as certain fails curing and auto-collateralisation trades). The industry is being called upon to provide extensive feedback and example transactions, securities collateral and parties to a transaction in response to the questions posed in the current guidelines consultation due by 29 July 2019. ESMA will hold an open hearing on 15 July 2019 to provide further feedback ahead of the consultation submission deadline. Another item we expect to be addressed is the exact reporting start date for banks and credit institutions given that the first weekday after the 11th April go-live date is Easter Monday in many but not all jurisdictions – this will avoid different start dates depending on whether it was a public holiday or not. All in all, several reasons to be cheerful! 

Kaizen is helping a number of firms prepare for SFTR reporting including pre-go live accuracy testing using our multi-award winning ReportShield™ quality assurance service, programme design and implementation, development of an appropriate controls environment, training and subject matter expert support.  Please contact us for a complementary consultation to find out more.