UnaVista
UnaVista’s SFTR product manager, Catherine Talks, discusses how the London Stock Exchange Group has come together to offer compatible solutions to help the market get ready for go-live of SFTR
UnaVista recently hosted an SFTR roundtable, what were some of the main takeaways?
At the London Stock Exchange Group, a number of our busineses including UnaVista, LCH and MTS, as well as our clients, are affected by the Securities Financing Transactions Regulation (SFTR). We have come together to offer solutions that are compatible to help the market get ready for reporting in an accurate and consistent manner.
The presentations given at the roundtable looked at the challenges we found talking to our members.
We were also talking about our offerings. LCH is a clearing house and has a reporting obligation, so we have come together to offer what we call ‘assisted reporting’ for LCH’s RepoClear members. We will take LCH’s side of the trade and then make it available for the other counterparty so that it helps them know that the reference data is provided from the golden source of the central counterparty (CCP). This will ensure that there will be a good result in the reconciliation process at the trade repository.
We are also working closely with MTS, one of Europe’s leading electronic repo platforms. MTS has developed the SFTR blotter, which automatically enriches cleared and bilateral trades on the MTS repo platform with collateral and master agreement reference data and maps these to the SFTR fields and formats. We are working with MTS so that the SFTR blotter can be sent directly to the UnaVista trade repository under our technical router model. This means that the repo market can benefit from straight-through-processing from execution and clearing to reporting.
We are six months away from the implementation of SFTR, will market participants be ready?
The response that we have found has been quite varied. SFTR, unlike other regulations, doesn’t just have one start date, it is actually a staggered start date, which means that there are four different phases at which different entities come into scope for reporting. Because of that, depending on the cycle you’re obligated to report in, there are different waves and variation in how ready firms are. The European Securities and Markets Authority (ESMA) has published a number of texts for firms to utilise for reporting purposes. The level two text explains what fields have to be reported and the allowable content of those files. This has been available for some time now so we have seen firms undertaking projects to get their data in the right format for reporting. Again this depends slightly on the reporting phase that the firm has to adhere too, for firms who do not have an obligation to report until phase four there is an extended period to allow for readiness. I think firms are very aware of their obligations and we have seen firms undertaking testing already. We have had a solution available since June 2018 to assist firms in their data readiness phase, which we have seen firms utilise to ensure that their data gets more compliant to the latest standards.
On 31 October, ESMA published the XML final schemas. I think firms will need to analyse the new documents and begin the implementation process of those messages.
Could the December release of the level three text cause a delay given that firms will only have from December to April to prepare?
The timelines for reporting for SFTR are in the official journal publications. The March official journal publication contained information relating to the field content, firms have been working with that information so it would surprise me if there was a delay given the information that has been available for some time now.
What are the main sorts of questions and concerns you receive from clients regarding SFTR? Is there a pattern to these questions?
The type of questions that we receive are very varied because there are different implementation timelines. We get some questions from the buyside relating to specific trading models, for instance firms in phase three who do not need to report in April but need to provide the sell side who have a reporting obligation in phase one with specific allocations to block trades. Some of the buyside firms are therefore having to think about how they provide that data, the actual allocation data on the beneficial owners in the report up to the sell side ahead of their reporting. MTS has, for example, seen an increase in electronic trading on its dealer-to-client BondVision Repo platform, where the ability to seamlessly share allocation information between the buyside and their dealers is a key element of the STP on offer.
Another question that we receive quite a lot is around the regulatory timeline, as CCPs are mandated from phase two and not phase one. The question of how firms going to get their data and their unique trade identifiers (UTI) ready and reported when the CCP doesn’t become reportable until later continues to come up. Working closely with LCH, we know that they are actually going to be reporting early and the UTI generation algorithm has been published on their website. LCH are offering an enhanced suite of reports to its members to assist them in their reporting obligations as well as working with ourselves to offer the assisted reporting solution. Where we find specific challenges in the market are working hard to make sure we have solutions to help the industry.
A recent survey has highlighted that firms are holding out on picking their TRs for SFTR because the TRs are not publishing their pricing. Have you published your pricing? What have you heard about other TRs?
SFTR is quite unique in the fact that we have seen people hold off selecting their TRs but the main reason seems to be because they are selecting vendors first. Because of market fragmentation, a lot of firms might have a number of different systems that they are using to trade in different ways depending on the products.
For securities lending, they might be using agents or for repo trades they might be executing more bilaterally or use central clearing. There are also different places that data might be located and a number of different systems the data might be reported from. We are seeing the market coming together to use innovative solutions such as the MTS SFTR blotter, the LCH assisted reporting module, or even other vendors to allow the various reports to be maintained more centrally. There is also an array of offerings that have additional services such as pre-matching and UTI generation. The vendors would then report to the TRs and we do have active vendor relationships. We have over 50 different partners across our UnaVista offerings.
