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SFTR

SFTR consultation responses

ESMA recently closed a consultation on the Securities Financing Transaction Reporting regulation (SFTR). The scope of SFTR includes “commodities lending”, which could be taken to include certain activities undertaken by commodity and energy market participants. SFTR covers Non-Financial Counterparties (NFC), as well as Financial Counterparties (FC). Earlier this year the start dates of reporting were announced as April 2020 for Banks and January 2021 for NFCs (see here).

The consultation document, which can be found here, contained several references to the commodities requirement, for example on page 22.

The responses can be found here. Some of the responses contain answers that are relevant to the industry. These include:

EFET (here):

  • In scope items (Answer 1) – Some gas transactions could be technically within scope. it is suggested that where a transaction is not undertaken for financing purposes it be excluded from scope.
  • Double reporting (Answer 10) – Any in scope transaction that is also within the scope of REMIT should not be double reported.
  • Inter group transactions (Answer 17) –  An exemption to reporting inter group transactions be implemented on the same basis as EMIR REFIT.
  • Backloading (Answer 38) – Suggestion to remove the requirement for commodities.
  • Phase in (Answer 42) – Any transaction involving an NFC should only be reportable from January 2021. Currently, a transaction between an NFC and FC is reportable by the FC from April 2020 (or other start date). This requires the NFC to provide details to the FC.
  • Reporting formats (Answer 59) – Standards should align as much as possible to EMIR and REMIT.

LBMA (here):

  • In scope items (Answer 1) – In relation to precious metals where a transaction is “for commercial purposes” it should  be out of scope.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.

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