ONE YEAR UNTIL SFTR - GET THE SFTR ADVANTAGE (WEBINAR INSIGHTS)
On 15 April UnaVista hosted a webinar alongside partners IHS Markit to review the current status of SFTR and share details on how their joining forces will make for an easier, more robust implementation for SFTR reporting.
The Power of the Partner
Within business, many companies understand that joining forces with other firms creates a unique and powerful service to their clients when bringing new products to the market. This is very prominent in the financial services industry where firms come together to create new data products, new outsourcing initiatives and new regulatory compliance services. On 15 April, UnaVista hosted a webinar alongside partners IHS Markit to review the current status of SFTR and share details on how their joining forces will make for an easier, more robust implementation for SFTR reporting. UnaVista’s Catherine Talks, SFTR Product Manager was joined by IHS Markit’s Fabien Romero, SFTR Product Director and Jonathan Tsang, Product Development Associate Director for the panel discussion.
Working Together for a Smoother Implementation
The industry has been waiting for a while, but the SFTR regulation has finally come into force. April 2020 is set to be the first go-live date for Investment Firms and Credit Institutions, followed by CCPs and CSDs in July 2020, phase 3 will see Insurance, UCITS, AIF and Pensions report in October 2020, and finally Non-Financial Companies will begin to report in January 2021.
In the past few months we have seen ‘Lite’ versions of solutions come to the market, with both UnaVista and IHS Markit providing products that give firms a headstart on identifying what fields are required for reporting. These pre-UAT data analysis tools have been invaluable to firms in the lead up to a new regulation coming into force. UnaVista clients found the UnaVista Accelerator Tool extremely valuable in the preparation for MiFIR, so extending this to support SFTR data preparation and validation projects was a natural fit. In fact, the UnaVista Accelerator saved firms around 4 months in preparation time for MiFIR reporting.
With a year until the initial go-live, UnaVista proposed the question to the webinar audience, What stage are you in selecting your vendor?
30% of participants had already selected a vendor, another 30% were actively evaluating vendors, and 24% were yet to begin their search. Six months ago, 32% were yet to begin their analysis, with a good proportion of the firms waiting for the approval of the final SFTR RTS before they started their work.
How does this compare to other high-profile regulations launched in the last couple of years? Well, for example, six months before go-live of MiFIR, 39% of firms polled were in the process of analysing the compliance requirements, 16% had just started to research the reporting requirements and 15% were at the stage of vendor selection.
A year before the scheduled go-live of Consolidated Audit Trail (CAT) in the US, 57% of polled firms had not started their analysis, so it would seem that firms are getting better in the lead up to new regulations coming into play. Firms appreciate that these regulations do come around quickly, and even with a delay, which was seen in both MiFIR and CAT, it is still to a firm’s advantage to begin preparation as early as possible, leaving a sufficient amount of time for testing and the development of operational efficiency processes.
Talks gave the message “The actual requirements for the details that have to be reported is quite expansive. There is a lot of information that you need to get from the market place such as the UTI, and that’s really key for the reconciliation process… start looking into the vendor relationships that you wish to utilise.”
Romero commented that much of the delay in firms beginning their projects was due to “no budget, no staff to look into it.” Some consultants are quoting 50-60 weeks of implementation, “knowing the first phase of the regulation is in less than a year’s time, it is really getting tight…. get onto it.”
Do firms think they will be ready on time?
This is always an interesting question, how close to the line do firms get to meeting these types of deadlines. When polling for the confidence firms had in meeting their MiFIR reporting deadline, 57% said they “will probably be ok”, 28% were nervous, 11% very confident, and 4% admitting they would not be ready for go-live.
With SFTR, 12% of firms felt they would be ready 6 months before go-live, 24% stated readiness 3 months before, and 47% around go-live. Tsang stated firms would have learnt from the past, missing out keys stages such as onboarding into their project timeline. He stated that “making sure that you understand where the data comes from, your source systems, making sure you select the right partner in order to help with your solution” is a key part to this process.
Do challenges still lie ahead?
Any new regulation, no matter how many times we have done this in the past, present new challenges for compliant firms. Much of pain comes from infrastructure and reference data provisions, but significant improvements have been made in both these areas over the years of dealing with regulatory reporting.
Asking webinar participants, what are your biggest challenges on SFTR? Data provisions (reference data) was an issue for 24% of participants. Comparing that to 47% of participants in a similar MiFIR webinar in 2016 before go-live of the regulation, it is great to see almost a 50% drop in this statistic, marking it as less of a concern for firms, but it is important to recognise that it is still an issue that needs addressing. Identifying reportable fields was the biggest challenge for SFTR firms at 41%, UTI generation 15% and LEIs at 6%. UnaVista are part of a number of industry working groups such as ICMA, ISLA and SWIFT, and by collaborating with the market participants, we are seeing more documentation being produced by regulators that can help alleviate some of the challenges.
Outside of the data requirements, technology was still a concern for firms, with a lack of flexibility of in-house solutions being a problem for 15% of the participants.
Why Partners are important to the elimination of challenges?
Much of the data required for reporting will flow through some existing pipe which needs to be extended to connect to an SFTR Trade Repository such as UnaVista. IHS Markit will be a key data provider for the industry, connecting to approved SFTR Trade Repositories. Injecting multiple data sources into their solution, they will provide a service for data mapping, validation and enrichment. Similar to the UnaVista Rules Engine, tools like this help reduce the burden felt with inflexible in-house solutions, as they are set up to receive any proprietary data format and transform this data to meet the reporting specification, without having to do work on the in-house technology. To address the issue of UTI generation, a pre-reconciliation service is to be provided by IHS Market, designed to reduce the number of post reporting matches required by the regulation. This data will then be passed onto a SFTR Trade Repository such as UnaVista to meet the T+1 reporting obligation.
UTI generation and inter-TR matching have been key issues for firms in other dual sided reporting obligations, and although the matching is a mandatory post-reporting obligation by SFTR Repositories, IHS Markit, working alongside their partners Pirum, will be helping the industry tackle this potential issue with pre-reporting reconciliation and UTI generation. The integration of Pirum into IHS Markit, and then into UnaVista will provide a seamless workflow for firms in the data workflow. The ability to reuse infrastructure, and data workflows for multiple reporting obligations provides consistency and greater integrity in data being reported.
Partners in Delegation
Vendor partnerships are not the only type of partnerships being used in SFTR reporting, firms are partnering with counterparties and administrators to assist with their reporting workflow and general regulatory reporting management.
Delegated Reporting is a subject that is discussed with all regulation, can someone else do the reporting for you? In some instances, yes, in some instances, no, in some instances partially. UnaVista has developed various models to support each of these answers, providing full delegated reporting, partial delegation whereby multiple entities are involved in the reporting process, and direct reporting whereby the reporting entity reports on behalf of themselves. Will Delegated Reporting be something firms use for SFTR, 41% webinar participants will not be delegating their reporting, 35% will be looking to fully delegate their reporting, 6% partially delegate and 18% using a technical router for data transmission but managing the reporting process themselves.
Technology has evolved a great deal over the years, and RegTech has branched out to cater for so many of the nuisances associated with regulatory reporting. Learning from the past, understanding what challenges potentially lie ahead, and working together with other industry leaders, by using UnaVista in partnership with other quality vendors, the industry is well positioned to have a successful SFTR implementation.