COVID-19: MFSA Circular on ESMA’s Position on SFTR Backloading

The MFSA Circular on Regulation (EU) No 2015/2365 (“SFTR”) on Securities Financing Transactions issued on the 27 March 2020 is addressed to all market participants, particularly entities which enter into securities financing transactions falling under the scope of SFTR, inter alia financial and non-financial counterparties as defined in Article 3 of SFTR.

This article is to be read in conjunction with the SFTR, and the Delegated Acts. This article serves as a more recent update to the previous article written by GANADO Advocates on the Authority’s position on the postponement of reporting obligations, which can be accessed from this link.

SFTs Subject to Backloading

On the 19 March, the European Securities and Markets Authority (“ESMA”) put in place various mitigating measures on the EU financial markets, in light of the COVID-19 pandemic. These measures have been highlighted in Ganado Advocate’s previous article on the matter. ESMA has revised their statement in order to clarify the reporting obligation under SFTR of Securities Financing Transactions (“SFTs”) subject to backloading.

Following industry feedback, ESMA is clarifying that SFTs concluded between 13 April 2020 and 13 July 2020, and SFTs subject to backloading under the SFTR also fall within those issues in respect of which National Competent Authorities (“NCAs”) are not expected to prioritise in their supervisory actions towards:

(i) counterparties;
(ii) entities responsible for reporting; and
(iii) investment firms in respect of their reporting obligations under SFTR or MiFIR.

Furthermore, ESMA is informing NCAs to use a risk-based approach and proportionality measures in exercising their supervisory powers and day-to-day enforcement of applicable legislation.

ESMA continues monitoring closely the implementation by the relevant market participants as well as the impact of the relevant measures taken with regards to COVID-19 to ensure alignment of SFT reporting requirements and supervisory practices in the EU.

We shall be monitoring the situation closely and will issue further updates as things develop.

This update is for informational purposes only and does not contain or convey legal advice. The information contained in this note should not be used or relied upon in regard to any particular facts or circumstances without first obtaining specific legal advice.