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-EU [[Regulation on Transparency of Securities Financing Transactions and of Reuse]] (2015/2365), colloquially {{tag|SFTR}}, is a large and pointless regulation which causes unassuaged excitement amongst lawyers and profound ''ennui'' amongst everyone else.
+{{anat|sftr|}}
+''See also: [[Boredom heat-death]] of the universe.''
+The grandly-titled {{tag|EU}} [[Regulation on Transparency of Securities Financing Transactions and of Reuse]] ({{eureg|2015|2365|EC}}) — to its friends the [[securities financing transactions regulation]] and around the kitchen table {{tag|SFTR}}, is a large and pointless {{tag|EU Regulation}} which causes unassuaged excitement among [[Mediocre lawyer|lawyers]] and profound ''[[ennui]]'' among everyone else.
+{{Art 15 SFTR disclosure document}}
+===[[Transaction reporting]]===
+SFTR requires transaction reporting of [[securities financing]] arrangements. SFTR transaction reporting is different from [[EMIR]] and [[MIFID]] trade and transaction reporting — for one thing, the exact time and price of execution of a [[stock loan]] is less critical data point, seeing as either side can cancel a [[stock loan]] at any time without penalty (before or after settlement), so the time of decision to deal is moot — do you ever really become bound to trade a stock loan? Nor, really, is there a price at which you trade a stock loan, since ([[QED]]) a stock lender just delivers a share to the borrower, but keeps economic exposure to the price risk of the stock, while the borrower only takes economic exposure to a borrowed stock when (and if) the borrower [[Short selling|short sells]] it into the market — which is a different transaction (a [[cash equity]] sale), not connected to the [[stock loan]] — it is none of the lender’s business whether the borrower sells the stock or holds it — and if the borrower does sell the stock, that transaction would be covered by the EMIR transaction reporting regime (where decision to deal, price etc is important).
+==={{t|SFTR}} versus {{t|EMIR}}: Regulatory Deathmatch===
+Can you be in scope for {{t|SFTR}} transaction reporting ''and'' in scope for {{t|MiFID}} trade reporting? Some [[ESMA]] guidance is a little ambiguous on this point, espectially since, if you wanted to, you could dress up a [[stock loan]] to look a lot like a [[derivative]]:
+To [[me]] the difference between a ''real'' swap, which is out of scope for [[SFTR]], and a swap which is secretly a [[repo]]/[[stock loan]] and is ''in'' scope for [[SFTR]] is this:
+*'''Under “real derivative” swap transactions''':
+**The [[reference asset]] is struck at a negotiated price – therefore [[best execution]] is important;
+**There is a specified term, or at least an asymmetry in the parties’ termination rights so at least one party has some option value in the transaction
+**The transaction can swing around in value (reflecting the price of the embedded [[option]]) - the transaction in isolation is not intrinsically collateralised: at any time after trade date it will have a mark-to-market value
+**Any collateral arrangements take place outside the terms of specific transactions (and will be aggregated to cover net exposures under all transactions under the Master). So, as you know, the {{t|CSA}} under an {{t|ISDA}} is deemed to be a separate transaction.
+**Therefore variation margin regulations are relevant to swaps, because the transactions themselves aren’t intrinsically collateralised.
+*'''“Real SFTR” transactions'''
+**The asset must be real, it must be [[Physical security|physically delivered]], rather than executed at a price, with a corresponding physical return obligation, so “[[best execution]]” on the asset in question is not relevant;
+**There is usually not a specific term, and either party can cancel at any time (therefore there is no option value)
+**Each transaction has its own collateral leg and is thus intrinsically collateralised: its value is “zeroed” each day
+**While operationally these collateral legs are usually aggregated across all outstanding transactions, the collateral movement on any day is not a “separate transaction in any sense”
+**Margin being built in, the variation margin regulations are less relevant.
+The [[bloody minded]] among you ''could'', no doubt, configure an {{t|ISDA}} transaction to have all the characteristics of a “real SFTR” transaction, but it would take quite a bit of legal engineering and it is hard to see why you would do it (other out of sheer professional pride in your capacity to be [[bloody-minded]], a force of nature one should not take lightly):
+*Initial exchange: Physical delivery of the reference asset against delivery of eligible collateral assets – hence “execution price” is moot
+*Daily re-striking of the transaction at zero against a commensurate transfer of eligible collateral assets one way or the other
+*Physical return of the same asset at termination against physical return of the equivalent prevailing collateral assets
+*General termination right for either party on a standard settlement cycle notice by redelivery of assets
+A trade having these characteristics ought not trigger CSA movements as it would be permanently zeroed at the time where collateral demands were calculated. Such a trade would still come within the MiFID definition of a [[derivative contract]] (“options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, emission allowances, or other derivative instruments, financial indices or financial measures which may be settled physically or in cash”) but I defy you to come up with a better solution for what ESMA thinks it means when it talks about liquidity swaps that don’t meet the MiFID definition of "[[derivative]]s".
+Does this help?
+{{sa}}
+*[[MiFID]]
+*[[EMIR]]
+*[[Boredom heat-death]] of the universe
+{{ref}}