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SFTR: Difference between revisions
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{{anat|sftr}} | {{anat|sftr}} | ||
{{tag|EU}} [[Regulation on Transparency of Securities Financing Transactions and of Reuse]] ({{eureg|2015|2365|EC}}), aka the [[securities financing | {{tag|EU}} [[Regulation on Transparency of Securities Financing Transactions and of Reuse]] ({{eureg|2015|2365|EC}}), aka the [[securities financing transactions regulation]] and colloquially {{tag|SFTR}}, is a large and pointless {{tag|EU Regulation}} which causes assuaged 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 some well meaning industry associations 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 the regulatory initiative that, so say some commentators, nearly caused the [[boredom heat death]] of the universe, when some well meaning industry associations 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]]”. | ||
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*'''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 | **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 | **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. | **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. | ||
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**Margin being built in, the variation margin regulations are less relevant. | **Margin being built in, the variation margin regulations are less relevant. | ||
The [[bloody minded]] | 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 | *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 | *Daily re-striking of the transaction at zero against a commensurate transfer of eligible collateral assets one way or the other | ||