Regulation (EU) 2015/2365 of the European Parliament and of the Council on transparency of securities financing transactions and of reuse and amending Regulation 648/2012 (the SFTR) is intended to enhance the transparency of securities financing markets and the wider financial system. It creates an EU framework under which details of securities financing transactions (SFTs) can be efficiently reported to trade repositories (TRs) and information on SFTs and total return swaps is disclosed to investors in collective investment undertakings. The definition of SFT in the SFTR does not include derivative contracts as defined in Regulation (EU) No 648/2012 (EMIR). However, it includes transactions that are commonly referred to as liquidity swaps and collateral swaps, which do not fall under the definition of derivative contracts in EMIR.

The new rules on transparency provide for the reporting of details regarding the SFTs concluded by all market participants, whether they are financial or non-financial entities, including the composition of the collateral, whether the collateral is available for re-use or has been reused, the substitution of collateral at the end of the day and the haircuts applied.

The SFTF was adopted by the European Parliament on 29 October 2015. It was adopted by the Council of the EU on 16 November 2015. It was published in the Official Journal of the EU on 23 December 2015. It came into force on 12 January 2016, and applies from that date with certain exceptions.

Under the SFTR, the European Securities and Markets Authority (ESMA) is mandated, among others, to draft regulatory technical standards and implementing technical standards regarding the registration of TRs for the purposes of reporting of SFTs.

ESMA has now published a Discussion Paper that sets out proposals for implementing the reporting framework under the SFTR, including tables of the fields with the proposed data to be reported, and the registration requirements for those TRs which want to accept reports on security financing transactions.

The deadline for comments on the Discussion Paper is 22 April 2016. ESMA will use the responses to its Discussion Paper to develop detailed rules on which it will publish a follow-up consultation in the second half of 2016. ESMA shall send draft rules for approval to the European Commission by 13 January 2017.

View ESMA consults on securities financing transaction regulation, 11 March 2016