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SFTR: Difference between revisions
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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. | 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=== | ===[[Transaction reporting]]=== | ||
SFTR | 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=== | ==={{t|SFTR}} versus {{t|EMIR}}: Regulatory Deathmatch=== | ||