The Financial Conduct Authority (FCA) has published a statement explaining what Trade Repositories (TRs), and UK counterparties that use them, should do to make sure they are compliant with UK Securities Financing Transactions Regulation (UK SFTR) reporting obligations from the end of the transition period.
Temporary Transitional Powers: exception for SFTR reporting and TR requirements
To help firms adapt to their new requirements under UK legislation, HM Treasury has given UK financial regulators the power to make transitional provisions to financial services legislation for a temporary period. This is known as the Temporary Transitional Power (TTP). This means firms and other regulated persons do not generally need to prepare now to meet the changes to their UK regulatory obligations brought about by onshoring, but the FCA expects firms to use the duration of the TTP period to prepare for full compliance with the onshored UK regime by 31 March 2022. There are, however, some areas where the TTP will not apply.
In a statement published on 1 October 2020, the FCA confirmed that the SFTR reporting requirements for UK SFTR counterparties and requirements for TRs are “key areas” which are excluded from the TTP. These firms must comply from the end of the transition period.
The TTP does not apply to onshoring changes for UK counterparties subject to the reporting obligation under the UK SFTR regime, or to the onshored requirements for TRs. Therefore, from the end of the transition period, all UK SFTR counterparties who enter into securities financing transactions in scope of UK SFTR will be required to report details of those transactions to an FCA-registered, or recognised, TR.
In addition, the TTP does not apply to requirements for TRs under the UK SFTR regime. The TTP will apply to securities financing transactions in one respect where one of the counterparties is a member of the European System of Central Banks (ESCB).
However, where firms are subject to MiFIR transaction reporting obligations they will need to report these securities financing transactions to the FCA under the UK MiFIR, where the counterparty is a member of the ESCB.
The following requirements will therefore apply immediately from the end of the transition period:
UK SFTR counterparties will be required to report details of SFTs to an FCA registered, or recognised, TR.
UK TRs must fulfil their requirements under UK SFTR.
Suspension of the reporting requirements
The SFTR SI introduces a new power for the FCA to suspend the reporting obligation for a period of up to one year, with the agreement of the Treasury.
The use of this suspension power is limited only to the event that there are no FCA registered, or recognised, TRs available for UK counterparties to report to.
Click on the link for further information.