A majority or 70 % of banks, asset managers, hedge funds and brokers are planning to consolidate their disparate regulatory reporting requirements under a single platform following the implementation of the Securities Financing Transaction Regulation (SFTR), according to Pirum and IHS Markit’s SFTR Post-Implementation Industry Survey.
The survey. which canvassed over 80 in-scope firms, also found that 54% have used the SFTR implementation as a catalyst for rethinking their regulatory reporting processes for various regimes, including MiFID and EMIR.
The SFTR, which is designed to reduce ‘systemic risk in the securities financing transaction market by increasing transparency and surveillance,’ was first introduced in 2016. It has had several ‘phase in’ periods with different entities expected to comply in incremental stages. Covid-19 further delayed full implementation, but it is now applicable to all parties.
Looking ahead, the survey said that firms anticipate lengthy consultation periods on new and amended regulations, more prescribed data standards and validation rules, as well as the prospect of additional reporting requirements.
Other key considerations highlighted in the report were data harmonisation and improving overall data quality, where “the market as a whole needs to commit in order to find a solution”.
It also notes that firms need to work on improving the quality and accuracy of their reporting, particularly on collateral data, to meet regulators’ ultimate objectives of increased transparency.
Equally as importantly, the report said that while fines for SFTR non-compliance or inaccuracy have not been handed out to date, regulators still expect firms that are in scope to ensure they are reporting accurately and promptly.
Although Unique Transaction Identifiers (UTI) Pairing was seen as a major challenge of SFTR, 80% of respondents have been able to achieve all or most of their pairing. By contrast, only 28% are satisfied with their UTI pairing for EMIR several years after implementation,
Pierre Khemdoudi, SVP of Equities and Regulatory Reporting at IHS Markit said, “It is clear that while the implementation of SFTR was complex in many ways, market participants rose to the occasion and successfully navigated challenges through innovation. As firms recognize the value of streamlined reporting and the need for data harmonisation, there is a strong opportunity to leverage enhanced analytics for greater insights on transactions.”
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