ESMA Defers SFTR Start Date for Phase One Reporting Entities

ESMA now expects trade repositories, credit institutions, investment firms to be ready for SFTR reporting from 13 July, alongside CSDs and CCPs. 

ESMA (European Securities and Markets Authority) has effectively allowed banks and investment firms a three-month grace period to comply with SFTR (Securities Financing Transactions Regulation), in response to industry feedback.

Under the original four-phase timeline, credit institutions and investment firms were required to start reporting SFTs (securities financing transactions) from 13 April, and CSDs (central securities depositories) and CCPs (central counterparties) from 13 July. (To be followed by funds, insurance companies and pension funds from 12 October; and non-financial counterparties from 11 January 2021.)

On Monday (16 March), key industry bodies ICMA (International Capital Market Association) and ISLA (International Securities Lending Association) wrote to ESMA asking for a delay to the April go-live date, citing the significant challenges that the Covid-19 pandemic and the related measures pose to members’ SFTR implementation projects.

“The impact on personnel involved in SFTR implementation programmes, compounded by pressures on firms caused by the associated surges in market volatility and volumes, has reached a point where firms believe that their capacity to ensure compliance with the requirements as of 11 April has been critically compromised,” the letter said.

“In light of such exceptional circumstances, we would like to ask ESMA to initiate, as a matter of urgency, the procedure for obtaining a formal delay of the SFTR reporting go-live date to an appropriate date that falls well outside the expected critical phase of the pandemic,” it added, calling for an 11 October start date.

In a new statement, ESMA has acknowledged the challenges that the trade repositories, counterparties and other firms face in finalising their implementation of the SFTR requirements and completing the necessary technical set-ups before 13 April 2020.

Further, ESMA itself is also not able to record the details of SFTs, leaving counterparties, entities responsible for reporting and report submitting entities
unable to report by the April start date.

“ESMA therefore expects competent authorities not to prioritise their supervisory actions … in respect of SFT reporting obligations, under SFTR and under MIFIR, as of 13 April 2020 and until 13 July 2020, including regarding SFTs concluded in that period of time,” it said, asking authorities to apply a  risk-based approach in the exercise of supervisory powers and enforcement of applicable SFTR legislation in a proportionate manner.

As such, ESMA now expects trade repositories, credit institutions, investment firms, CCPs and CSDs and relevant third-country entities to be ready for SFT reporting from 13 July.

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