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