The proposal for a Securities Financing Transactions Regulation (SFTR) provides a set of measures aiming to enhance regulators’ and investors’ understanding of securities financing transactions (SFTs). During the financial crisis, regulators and supervisors encountered difficulties in anticipating the emergence of risks in the area of securities financing. Both internationally and in the European Union, it was widely agreed that transparency needs to be enhanced.

Objective

SFTR is part of a globally coordinated effort initiated by the Financial Stability Board (FSB) to reduce financial stability risks from shadow banking activities.

The regulation will require companies to report their SFTs to an approved EU trade repository.

Time line

On 12 January 2016, the regulation to improve the transparency of securities financing transactions and their further use entered into force. In 2018, the European Securities and Markets Authority (ESMA) and the European Commission adopted the technical regulatory standards (Level 2 measures) of the SFTR. The regulations are to be applied from 2020.

SFTR: the highlighted parts of the value chain are affected