AIFMs’ queries on SFTR answered
07 October 2016 Paris
Image: Shutterstock
The European Securities and Markets Authority (ESMA) has continued its campaign for clarity around the Securities Financing Transaction Regulation (SFTR), responding to a request for clarification on its effect on alternative investment fund managers.
In an ongoing Q&A on the applications of the Alternative Investment Fund Managers Directive (AIFMD), ESMA responded to a question on when UCITS management companies, UCITS investment companies and AIFMs will be required to report certain information to investors.
SFTR requires these companies and AIFMs to report their use of securities financing transactions and total return swaps in the annual report of every UCITS or alternative investment fund under management, and in each six-monthly report for UCITS.
This requirement will apply from 13 January 2017. ESMA clarified that this information must be included in the first annual or six-monthly report published after that date, adding that this may include a reporting period beginning before January 2017.
The response to this query is the latest in a continuing initiative to improve transparency into the securities finance industry.
In a report earlier this week, ESMA raised concerns that securities finance transactions could lead to a build-up of leverage that could threaten financial stability.
ESMA endorsed the Financial Stability Board’s qualitative standards on the methodology used to calculate haircuts in non-centrally cleared SFTs, which should be introduced as a first step to improve the transparency and stability of haircuts, and the resilience of financial institutions.
The authority also agreed to revise the SFTR collateral reporting rules, responding to concerns from market participants relating to a proposed requirement to report on collateral on a T+1 basis.
The reporting deadline has now been pushed back to the day after value date.
In an ongoing Q&A on the applications of the Alternative Investment Fund Managers Directive (AIFMD), ESMA responded to a question on when UCITS management companies, UCITS investment companies and AIFMs will be required to report certain information to investors.
SFTR requires these companies and AIFMs to report their use of securities financing transactions and total return swaps in the annual report of every UCITS or alternative investment fund under management, and in each six-monthly report for UCITS.
This requirement will apply from 13 January 2017. ESMA clarified that this information must be included in the first annual or six-monthly report published after that date, adding that this may include a reporting period beginning before January 2017.
The response to this query is the latest in a continuing initiative to improve transparency into the securities finance industry.
In a report earlier this week, ESMA raised concerns that securities finance transactions could lead to a build-up of leverage that could threaten financial stability.
ESMA endorsed the Financial Stability Board’s qualitative standards on the methodology used to calculate haircuts in non-centrally cleared SFTs, which should be introduced as a first step to improve the transparency and stability of haircuts, and the resilience of financial institutions.
The authority also agreed to revise the SFTR collateral reporting rules, responding to concerns from market participants relating to a proposed requirement to report on collateral on a T+1 basis.
The reporting deadline has now been pushed back to the day after value date.
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