Adaptation to the Securities Financing Transactions Regulation

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An Assessment of Buyside & Sellside Business Model Impacts

This report examines the EU’s Securities Financing and Transactions Regulation, which is set for full implementation in Q4 2018. Specifically, the report explores the ways in which implementation and compliance with the regulation by investment banks and by buyside firms – while seemingly straightforward – could, in fact, result in some negative ramifications for some financial markets services business models – for example, in the provision of prime brokerage services.

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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.

Published on: 8 Nov, 2017

Adaptation to the Securities Financing Transactions Regulation – Table of Contents

      • 1.0 An Overview of the Regulation
        • 1.1 Defining the In-scope Transactions Covered by the Regulation
        • 1.2 An Overview of the Regulation’s Ramifications for Buyside & Sellside Entities
        • 1.3 Assessing the Impact on Key Clients: Non-financial Corporates
        • 1.4 The Implications of Buyside & Sellside Reporting Requirements
      • 2.0 Implications & Ramifications for the Prime Brokerage Business Model
        • 2.1 Securities Lending & Borrowing
        • 2.2 Margin Lending
        • 2.3 Assessing the Implications & Ramifications of the Regulation on Prime Brokerage Services Providers
        • 2.4 Assessing the Impact of the Regulation on Prime Brokerage Services Consumers
      • 3.0 The Impact of the Regulation on Buyside & Sellside Short-selling Activities
      • 4.0 The Impact of the Regulation on Repo & Sell-Buy Back or Buy-Sell Back Transactions
        • 4.1 Implications & Ramifications for Central Counterparties
      • 5.0 Implications & Ramifications of the Regulation on Different Types of Buyside Business Models
        • 5.1 A Lessening of Systemic Risk
        • 5.2 The Impact of the Regulation on Managers of UCITS and Alternative Investment Funds
        • 5.3 Impacts on Collateral & Securities Re-use to the Client Relationship
        • 5.4 Impacts on Structured Products Governance
      • 6.0 Appendices
        • 6.1 Glossary of Terms
        • 6.2 Structure of the Post-trade SFTR Reports to Transactions Repositories & the Data Fields
        • 6.3 Table of Figures