Regtek.Solutions Hones in on SFTR

Regtek.Solutions is boosting its focus on the Securities Financing Transaction Regulation (SFTR). 

The regulatory reporting provider has hired Chris Cornish in London as a consultant business analyst specialising in SFTR implementation. Cornish joins the firm from IHS Markit, where he was a senior business analyst and SFTR specialist. Previously, he held a similar position at ICBC Standard Bank. 

Part of his role at Regtek.Solutions will be to enhance the user experience within Validate.Trade, the vendor’s flagship product, which monitors the quality of reporting data. Improvements include supporting the forthcoming ISO 20022 messaging format as required for trade repository interactions, enhancing the reporting function with more stringent business rules than those mandated by regulators, and supporting the service-level agreement to stay up to date with any new regulatory changes. 

The European Commission adopted SFTR implementation rules in December 2018, and reporting is expected to begin in April 2020. According to Cornish, SFTR’s reporting framework is complex and “will be one of the most challenging regulatory reporting regimes to implement to date.”

He says many firms have not yet assessed what impact SFTR will have on their business, although some have had budgets reassigned because of delays in the regulation’s adoption. 

“The data required for SFTR is typically fragmented, both within and outside of firms’ own systems, so bringing it all together will be a massive challenge. In some cases, up to 40 percent of data points are missing or unavailable,” Cornish says, adding that data requirements encompass both transaction and collateral data, at both the field and record level. 

In addition, he says, firms must identify whether they have “mandatory delegated reporting” obligations, but many do not have the counterparty reference data that would identify whether any of the non-financial counterparties trading SFTs would meet the criteria to trigger the delegated reporting obligation. 

“Where firms make use of voluntary delegated reporting offerings, they will need to implement a control framework as they are still the entity responsible for the report,” Cornish says. “Event Identification is challenging. Counterparties must correctly report the conclusion, modification and termination of SFTs and be able to distinguish these from the other reportable lifecycle events. Deficiencies in existing processes and/or systems will need remediation in order to do so.” 

The events must also be reported in chronological order, so valid data is necessary to avoid backlogs. 

In addition to the ISO 20022 mandate, SFTs must be reported using a unique trade identifier (UTI), and regulators have stated that pseudo-UTIs are not compliant. 

“UTI generation and dissemination will be challenging, especially where in some cases the confirmation processes are not mature enough to utilise,” Cornish says.