It’s 2020, and SFTR implementation day is just a few short months away. But the path has not been smooth – and concerns abound over the timing, with limited information yet available from the regulator and industry-wide testing barely underway.

The regulation will create a major new reporting burden for firms, along with the need for improved settlement discipline and new reporting channels – all of which come at a cost, with firms failing to meet the required standards liable for heavy fines. But how can they prepare when they don’t know what to prepare for?

Under SFTR, both parties to a transaction have to report new, modified or terminated SFTs to a registered or recognised trade repository, using a unique transaction identifier, and comprising approximately 150 fields of data. But to do so, they need the correct reporting templates from the regulator.

Although ESMA released the XML schemas, which are needed to send data to the trade repositories, at the end of October, defects in the draft meant that the template was not ISO-registered until the end of December. Although the two versions are believed to be largely similar, the ISO version was needed in order to avoid contract violations between service providers and market participants due to reports being generated through the ISO 20022 messaging framework.

The delay has led to widespread concerns around the costs and challenges that could arise if further amendments to the reporting templates are introduced – not to mention further issues that might arise once full reporting gets underway.

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