Money market regulation – what’s in store for 2024/25?

In the world of transaction reporting, we’re always slave to events – economic crises, major fines, unexpected guidelines or Q&As. However, the path of wholesale regulatory development, new regulations and change tends to be slightly better signposted with official announcements, effective dates, regulations coming into force and reporting go-live dates. Relative to the world of derivatives, the regulatory landscape for money markets and SFTR looks significantly quieter in 2024.

However, this may prove to be the calm before the storm. 2025 and 2026 are set to host two brand new reporting regimes in the USA and it’s highly likely that these will coincide with the onset of the SFTR Review and subsequent Refit.  

SEC 10c-1a Securities Lending Reporting

Coming back to 2024: The next known change is the US deadline for the Financial Industry Regulatory Authority (FINRA), the sole Registered National Securities Association (RNSA) to publish implementation rules for SEC 10c-1a Securities Lending reporting. According to the proscribed timeline, this must occur by 2 May 2024. The clock will also be ticking for reporting itself to commence on 2 January 2026. These rules will set out how US securities lenders or their agents will be required to report 12 data elements relating to those loans. We will discover just how many reportable fields those 12 data elements translate into (I would suggest that while not of SFTR proportions it’s likely to be rather more than 12). In instances where a covered securities loan consists of a broker or dealer borrowing fully paid or excess margin securities, only the broker or dealer (the borrower) is required to report and not the lender. The final deadline is 2 April 2026, when FINRA will be required to publish aggregated transaction activity and the distribution of loan rates for each security.  

OFR’s Bilateral Uncleared Repo Reporting

The timing is less certain on the next most imminent regulation – it’s now more than 12 months since a 60-day consultation was announced by the Office of Financial Research (OFR) department of the US Treasury on proposed data collection for the bilateral uncleared repo market. In spite of this, we still await the final rule which remains imminent. This regime was successfully piloted in 2022. The reporting requirements are more extensive than 10c-1 and are likely to be a major burden to plan, build, implement and control ahead of a 2025 or 2026 go-live. There are 33 proposed data elements including haircut, rate and optionality. Mooted by the OFR as “The last segment of the US SFT market lacking a transaction-level data source.” They expect approximately 40 reporting institutions, made up of brokers, dealers and other financial companies with large exposures ($10bn+) to the non-centrally cleared bilateral repo market to have to report daily to the OFR.       

Expansion of Money Market Statistical Reporting (MMSR) in Europe

Returning to Europe: On 1 July 2024, an additional 24 banks will add to the ranks of Money Market Statistical Reporting (MMSR) institutions, on top of the 45 existing reporters. This follows the first major extension of scope. Following LIBOR decommissioning and a less benign interest rate environment, the regulation has seen greater scrutiny from the European System of Central Banks members in recent months. The new reporters were expected to implement a soft go-live at the beginning of 2024 ahead of a more formal adoption in July. These reports, due 7am CET on T+1 pertain to the four money market segments of Unsecured, Secured, FX Swaps and OIS markets. As the sole mechanism for calculating the benchmark Euro Short Term Rate (€STR) and the principle means for the ECB to monitor the market transmission of monetary policy, it is very apparent that data quality is critical and effective controls, paramount.

Closer scrutiny on SFTR in 2024

Last, but certainly not least, ESMA’s SFTR review and subsequent Refit planning is not expected until 2025. Nevertheless, a number of National Competent Authorities (NCAs) appear to be paying closer attention to data quality and compliance in 2024 as SFTR takes its place as a more mature and topical regulation in the current geo-political environment.

• If you have any concerns about existing or impending money market/securities financing regulation on either side of the Atlantic, please do not hesitate to get in touch with our team of regulatory experts at Kaizen.