The role of the trade repository and solving the data conundrum

The upcoming Securities Financing Transaction Regulation (SFTR) will require firms to set up a direct link with a trade repository (TR) for the reporting of their trades. Thomas Steimann , CEO of REGIS-TR, outlines what the TR role is in this new regulation, and how it can help firms overcome the challenge of data management.
By Joe Parsons

Sponsored by REGIS-TR

The European Securities and Markets Authority (ESMA) defines the role of a trade repository (TR) as an entity that “centrally collects and maintains records of securities financing transactions (SFTs)”. For the TR, this means validating, storing and matching transaction reports, making those reports available to authorised regulators and aggregating and anonymising the reported data as public information.

In practice, the role of a TR is much wider and less mechanical, partially due to financial reporting remaining a developing area. As the only direct link between the reporting firms and the authorities, TRs combine in-depth knowledge of both sides. They understand the detail of the regulations, designing their systems on that basis, and are in frequent contact with the regulators. TRs are also very aware of firms’ reporting practices; they monitor and analyse validation, reconciliation and other statistics, and provide support, hold discussions and receive feedback from their clients. With this expertise, TRs can make a unique contribution to reducing the gap between the regulatory requirements on paper and industry practice on the ground.

It will take time before the regulatory reporting framework matures to the point that it offers tangible benefits to the industry as a whole. With SFTR as with any other reporting regime, both firms and regulators need the stability and consistency to underpin the production of high-quality data, low rejection numbers and excellent reconciliation rates. The scale and workload of SFTR came as a shock to many, with its 155 fields, XML-only rule and the sheer volume of data to be somehow pulled together, verified and integrated. There are grounds for optimism, however, as the outcome should offer a strong increase in data quality across the board.

One contributory factor has been the strong alliance across industry bodies in response to SFTR, which has been widely appreciated. Working in collaboration to define best practice and guidance, the International Capital and Markets Authority (ICMA) and the International Securities Lending Association (ISLA) set up expert groups, bringing ESMA together with other regulators, trade repositories, market participants, infrastructure providers and vendors to analyse and develop the regulation. This has ensured a better understanding across all parties of the regulation and its practical application, allowing such issues to be addressed.

This process, in which REGIS-TR has been very much involved, has ironed out several difficulties and contradictions in the original legislation. Separately, the trade repositories formed an SFTR working group to maximise the efficiency of core inter-TR services, particularly transaction reconciliation and the process of switching to another TR. A particularly valuable reference for market participants is ICMA’s “Recommendations for Reporting” under SFTR; a freely available and actively maintained resource, with well over 200 pages packed with expert advice on the application and best practices in complying with the regulation.

Another factor which should improve data quality is the XML rule, which will eliminate the practical difficulties that arise when there is no common agreed reporting format. The ISO Evaluation Team – convened by Tomas Bremin, vice president at REGIS-TR S.A. – cooperated directly with ESMA to review and finalise a set of standard, registered ISO 20022 messages for each SFT data-related reporting communication.

Standardisation will go a very long way towards enhancing data quality, raising the level of successful reconciliations and making it possible to choose a TR simply on the basis of cost and performance. SFTR is a specialised, complex niche, and all firms should report to a TR that can provide both expert market knowledge and swift, responsive service support. REGIS-TR has unrivalled access to in-house securities lending, repo and collateral management expertise.

One of our parent companies, Clearstream, acts as principal in securities financing transactions and as a triparty agent offering repo, securities lending, collateral management services and CCP margining, while our parent company groups include Eurex Clearing, Eurex Repo and BME Clearing Repo. We guide our clients through the entire lifecycle of regulatory reporting and, whist we cannot provide legal or regulatory guidance, we are committed to finding you the right person to provide technical advice. REGIS-TR was the first TR to provide a client test environment for basic XML schema validation. Our current UAT, based on the standard, registered ISO 20022 schemas, is up and running and in use both by our clients and by other firms looking to test our SFTR and other solutions. We have also provided tools to assist clients with SFTR reporting, including a clear and comprehensive handbook, early onboarding and access to governing documents, training modules offered by Market FinReg and a comprehensive series of UAT demo videos in English, French, German and Spanish.

Our support network, which is free of charge to our clients, offers fluency in all main European languages and several others. Our proactive, expert client services team, with a response time averaging three hours works closely with our clients to solve complex issues and provide constant support. Our relationship managers, who are continually assisting clients with all aspects of our regulatory services, also hold regular user groups throughout Europe to discuss current issues and regulatory developments. For weekly updates, news and discussions surrounding the TR regime and the regulatory reporting environment, we publish a podcast featuring our team of experts and some industry leaders to discuss topical issues and stay in touch with our clients. The REGIS-TR Round Up is available on Apple Podcasts, Spotify, and all other mainstream platforms.

About REGIS-TR

REGIS-TR is a leading European trade repository offering reporting services covering all the major European trade repository obligations. In accordance with legislation promoting market transparency, the detail of the trades reported is aggregated to present a composite view of current positions for the benefit of regulatory authorities and market participants. REGIS-TR is open to financial and non-financial companies and institutions. In May, we received authorisation from ESMA to provide Securities Financing Transactions Regulation (SFTR), and we look forward to providing a fully flexible reporting service solution.

REGIS-TR is a joint venture of Clearstream (Deutsche Börse Group) and Iberclear (BME Group).

In the UK, our sister TR, REGIS-TR UK LTD, is registered by the FCA to deliver full UK EMIR services after Brexit. REGIS-TR UK LTD will introduce SFTR services for the UK in line with FCA timetables.

www.regis-tr.com

https://podcasts.apple.com/us/podcast/the-regis-tr-roundup

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