New SFTR Q&A: Question 9 – Portfolio Manager Reporting

New SFTR Q&A – Question 9 - Portfolio Manager Reporting WEB

ESMA have updated the SFTR Q&As to add Question 9: “Reporting of SFTs where an external portfolio manager participates.” This does clarify the requirement but this isn’t necessarily the helpful guidance the industry was looking for.  This means that unfortunately the challenges for the funds industry will persist.

In Part a) How should a portfolio manager be identified in an SFT report? The short answer is that they should not be identified unless formally performing a role as an agent lender or broker. Therefore, the trade repository reconciliation process remains very tricky where trades cannot readily be associated with a particular fund manager.

In Part b) In order to report estimated collateral reuse or cash reinvestment where a fund executes SFTs with several counterparties, those counterparties have a responsibility to provide the report submitting entity with relevant details to enable them to report. This includes the obligation for the reporting counterparty or report submitting entity to either calculate estimated reuse themselves, or provide the relevant details to the party taking delegated responsibility for performing the calculation.

Finally, Part c) Asks how variation margining on a net exposure basis should be reported when a financial counterparty or entity responsible for reporting uses multiple portfolio managers. In addition to this consideration for bilateral margining, they also raise the same issue in relation to triparty securities lending, also collateralised at the net exposure level. Again, the responsibility falls upon the reporting counterparty or report submitting entity to either perform relevant calculations themselves or provide necessary details to the party to whom it has been delegated to.     

At Kaizen, we are committed to helping reporting counterparties improve the quality of their SFTR reporting and ensure compliance with the regulation. Where the guidelines and Q&A still lack clarity, we can assist reporting parties through our ReportShield Accuracy Testing and Advanced Reconciliations to ensure that these obligations are met.

We eagerly await the ESMA response to the impending deadline for reporting third-country issuer LEIs, where the current exemption is due to end on 13 April 2021.