UK SFTR – Desynchronised Harmony

UK SFTR - Desynchronised Harmony Blog Image

UK announces SFTR validation rule changes

On 14 October 2021, the FCA published updated validation rules for SFTR in the UK. These amended rules are due to take effect on 14 April 2022.

In terms of the validation rules themselves, this move will bring them entirely into line with the new EU SFTR validation rules due to take effect from 31 January 2022. The current rules differ slightly in the treatment of price currency loan and collateral fields.

We think this is the right approach – UK/EU rules should either be harmonised (as is the case here) or fully diverged (as part of a more aggressive regulatory arbitrage) but not somewhere in no-mans-land in the middle.

The timing (April rather than January) arguably gives firms a little more time to implement the changes (something the industry has been very vocal about). The fact that these were announced in mid-October rather than the end of July (when ESMA made its announcement) negates this benefit somewhat, particularly for firms that only have a UK reporting obligation. The current two-speed timing (EU implementing in January and UK in April) also complicates things for dual reporting firms as it means two and a half months of validation rule divergence.

The FCA is dangling a carrot as firms will have until 14 April 2022 to make the changes. We hope ESMA will take the bait and offer a matching extension to its original implementation date!

  • If you have concerns about your firm’s SFTR data quality and regulatory compliance, working through the changes to the validation rules or undergoing trade repository migrations, we can help.  Please contact us for a conversation with Jonathan or one of our regulatory specialists to discuss your challenges.