SFTR: Difference between revisions

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 unassuageable excitement among [[Mediocre lawyer|lawyers]] and profound ''[[ennui]]'' among everyone else.

This is the regulatory initiative that, so say some commentators, nearly caused the [[boredom heat death]] of the universe when a well-meaning [[torpidity]]<ref>A [[torpidity]] is the [[collective noun]] for a group of [[industry association]]s. True.</ref> of [[industry association]]s produced a [[Media:SFTR-information-statement.pdf|5,000 word disclosure document]] explaining to seasoned industry professionals (whom you would think would know) what was meant by “[[title transfer]]”. This is mandated by Article 15 of SFTR to be sent wherever there is a [[title transfer collateral arrangement]]. Where, as in [[stock lending]] and [[derivatives]] trading, there is a ''mutual'' [[title transfer collateral arrangement]] (sometimes ''I'' have to post ''you'' collateral; sometimes ''you'' have to post ''me'' collateral), this leads to the faintly<ref>There goes that British understatement again: I’m learning, after thirty years in these isles.</ref> absurd requirement for the counterparties to send each other the identical risk notification. WAY TO GO, ESMA.

===Transaction reporting===

SFTR also requires transaction reporting of securities financing arrangements. This 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 interesting data point, seeing as you can cancel the stock loan at any time before or after settlement, so the decision to deal is moot, and there isn’t really a price, since ([[QED]]) a stock lender keeps economic exposure to the price risk of the stock, while the borrower only takes economic exposure to a borrowed stock by short selling it into the market — which is a different transaction (a cash equity sale), not connected to the [[stock loan]], and which which would be covered by the Emir transaction reporting regime (where decision to deal, price etc is important).