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==={{t|SFTR}} versus {{t|EMIR}}: Regulatory Deathmatch=== | ==={{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, | 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 swap which | 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''': | *'''Under “real derivative” swap transactions''': | ||
**The [[reference asset]] is struck at a negotiated price – therefore [[best execution]] is important; | **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 transaciton | **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 transaciton | ||
**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 | **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 | **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. | **Therefore variation margin regulations are relevant to swaps, because the transactions themselves aren’t intrinsically collateralised. | ||
*'''“Real SFTR” transactions''' | *'''“Real SFTR” transactions''' | ||
**The asset | **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) | **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 | **Each transaction has its own collateral leg and is thus intrinsically collateralised: its value is “zeroed” each day | ||