The Securities Financing Transactions Regulation (SFTR)

The Regulation on Transparency of Securities Financing Transactions (known as the SFTR) entered into force and started applying from 12 January 2016. However, as described in the article, there were a number of phase-in periods that apply, so that the obligations imposed by the SFTR did not all apply from that date.

The SFTR imposes new obligations in relation to three principal areas:

• Mandatory reporting of securities financing transactions to authorised or recognised trade repositories (the Reporting Obligation)
• Documentary and operational requirements in respect of all collateral reuse arrangements (N.B. not just limited to those relating to securities financing transactions) (the Collateral Reuse Requirements), and
• Transparency and disclosure requirements for managers of UCITS and alternative investment funds (AIFs) in respect of securities financing transactions and total return swaps (the Transparency to Fund Investors Requirements).

It is worth noting that the SFTR is an EU Regulation, as opposed to an EU Directive, meaning that it has direct effect in each of the EU Member States, without the need for further implementing national legislation.