The SFTR is designed to create new levels of transparency around the reporting of securities financing transactions that take place within the realm of the shadow banking sector. As such, the regulation requires banks, asset managers, hedge funds, institutional investors and some non-financial corporates – depending on the size of their balance sheet – to provide European Securities and Markets Authority-registered post-trade repositories with data related to:
- cash repo transactions, buy-sell back and sell-buy back;
- margin lending and collateral re-use transactions; and
- stock borrow loan transactions.
In order to provide this post-trade data to the designated SFTR transactions repositories, banks and buyside firms will be required to adjust existing processes and workflows that historically did not capture that data. However, once those processes and workflows are adjusted, GreySpark believes that the implementation of the SFTR will ultimately be more disruptive long-term for buyside market participants than for banks.
For example, GreySpark believes that the SFTR will specifically affect those buyside firms that handle large volumes of repo and reverse repo, SBL buy-sell back transactions or sell-buy back transactions as well as those institutions that maintain sizable securities lending or borrowing business models or those institutions that generate revenue off the back of outright collateral lending or from margin payments associated with collateral lending.
