SFTR: Is delegated reporting right for your firm?

Delegated reporting can offer firms a simplified way of complying with the regulation through working with one of their existing partners or counterparties.

Catherine Talks, SFTR Product Manager, UnaVista, LSEG

Summary

Under the Securities Financing Transaction Regulation (SFTR), firms that have a reporting obligation can either report directly to a Trade Repository (TR) or they can delegate the reporting obligation to another party under Article 4 of SFTR. Delegated reporting enables a counterparty to a trade or a 3rd party service provider to report on behalf of the other counterparty to the trade. Many of the firms looking to delegate their reporting obligations will include smaller financial parties and non-financial counterparties (NFCs) caught under
SFTR that are looking to simplify their regulatory reporting obligation. Some NFC’s will fall under the requirements for the submitting party to send both sides of the transaction to fulfil their reporting obligation and not be required to report directly.


Why choose delegated reporting?

Delegated reporting can offer firms a simplified way of complying with the regulation through working with one of their existing partners or counterparties. These firms can work with experienced providers to guide them through the reporting framework. Typically, firms that do not have the resources to report directly to a TR consider delegation a more efficient model by which to fulfil their reporting obligation.
Due to the complexity in the requirements to report for SFTR including the number of fields,
validations and the XML schema, UnaVista has seen a surge in demand of firms wishing to offer or uptake a delegated reporting model. UnaVista has developed the specifications to help firms understand the field requirements and the additional requirements embedded in the XML.
Additionally, UnaVista is offering two main models of delegated reporting (we are analysing a third subject to demand); the technical router and full delegated reporting models, for firms wishing to provide this flexibility to their clients.

Technical Router

The technical router model is offered by many of UnaVista technology partners. Generally technical routers are not a party to the trade, often the technical routers are CCP’s or technology firms including IHS Markit. The technical router may consume exception reports and display them in their GUI, the technical router will not log directly into UV to resolve a client’s exception although they wish to assist the reporting party with the reporting obligation. They can do this in one of two ways 1. The technical router can send the trade data to the TR directly
2. The technical router can send reports to their clients for the reporting firm to load to the TR. The reporting party will log into the TR or the technical router GUI and manage all exceptions; they may additionally wish to send data directly to the TR (not via the technical router) or even use multiple technical routers. The reporting party benefits from the use of analytics, peer-to- peer benchmarking and report generating functionalities in UnaVista’s Trade Repository.

Delegated Reporting

In contrast, the delegated model is generally offered by many of our larger firms such as investment banks. They are often a party to the transaction or may be a broker desk or acting as an agent. They will have the full trade details and will be looking to provide the report on behalf of a reporting party, additionally they will be resolving exceptions and managing the reporting obligation on behalf of their clients. The reporting party in this model will not have full access to the system but many firms will wish to take a view of the data within the solution. There will be the option for the view only reporting parties to view and run reports within the Trade Repository.

Why choose UnaVista?

UnaVista is an approved Trade Repository (TR) for EMIR and Approved Reporting Mechanism (ARM) for MiFIR and will apply to be a TR for SFTR when the window is opened by ESMA in 2019. Firms can streamline their regulatory reporting using UnaVista’s award-winning platform.
UnaVista has developed an SFTR Accelerator which is a pre-UAT testing tool with the functionality for firms to test their data. UnaVista’s extensive network of over 60 consulting firms and independent software vendors including IHS Markit can help firms streamline the reporting process to UnaVista’s Trade Repository.