Earlier this week ESMA published a final series of documents relating to 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). Reporting starts in April 2020 for Banks and January 2021 for NFCs (see here).
The documents comprise:
- A final report (here) – On the consultation
- Guidelines (here) – On reporting
- Validation rules spreadsheet (here)
- A statement on the use of LEIs (here)
In the final version, several items will be of interest to those in energy and commodities:
- There is more guidance on which transactions are in scope – A requested “REMIT carve out” for transactions under both rules has not been agreed to. This creates some complexity in terms of timing of reporting and double reporting in some cases. It is also stated that in the case of structured transaction involving both commodities lending and also for example futures and options, only the lending legs are to be reported.
- Commodities transactions entered into for “operational and/or industrial purposes” are now excluded from scope as are transactions involving emissions allowances.
- For the period between April 2020 and January 2021, when one of the parties is in scope, the other is responsible for providing data to them.
- Intra-group transactions are to be reported.
While most in energy and commodities will only need to start reporting at the later date, there may be some requirements earlier(e.g. providing information to counterparties). In most cases, only a small proportion of transactions will be in scope. Nevertheless, it is advised that an exercise in establishing what is in scope be initiated in the near future, if it has not already commenced.