What’s on the horizon for Securities Financing Transaction (SFT) Reporting in 2025?

Approaching the final act of 2024, the world remains in a perilous place, economic growth is faltering, interest rates have been slow to ease but inflation also remains sticky and prone to energy price shocks. In this environment, money market and securities finance transaction (SFT) reporting moves closer to the top of the Treasury’s and Central Bank’s toolkit as they seek to establish the effectiveness and transmission of monetary policy together with any signs of external factors impacting the order and robustness of broader capital markets.

New US regimes and SFTR Review

2024 will draw to a close in the money markets and SFT reporting space with the introduction of daily US Non-Centrally Cleared Bilateral Repo Market reporting to the Office of Financial Research (OFR) for major securities/government bond brokers and dealers, on 2 December. OFR Phase 2 on 1 April 2025 will see reporting expanded to cover ‘Category 2’ major ‘Buyside’ Non-Centrally Cleared Bilateral Repo market participants.

Elsewhere though, 2025 looks potentially like a year of delays. US securities lending reporting under SEC 10c-1a and administered by FINRA as Rule 6500 SLATE reporting is politically a very hot potato, facing a number of amendments and potential delays with the SEC postponing their approval of the FINRA rule until January, corresponding with Gary Gensler’s departure. Additionally, US trade associations are potentially launching other legal challenges. It might still go ahead on 2 January 2026 though!

The SFTR Review also appears to be subject to further delay, with no sign of it appearing on the ESMA 2025 schedule of work.

Where to focus for 2025

However, while many eyes may be pointing at the shiny new regulations, in practical reality, it’s the seasoned, mature regulatory reporting regimes that compliance officers want to worry about.

Regulators make allowances for new regulations, they let them bed in and teething troubles are tolerated – not so once a regime has been live for five years.    

Unfortunately, almost five years in, data quality in the SFTR space continues to let it down. It has perhaps not helped that (new UK validation rules – live on 25 November 2024 aside – which are largely a replay of ESMA’s March 2023 rules), SFTR has been somewhat untouched for an extended period now. The last SFTR Q&A was published in June 2023.

Of late, we’ve heard anecdotes of new NCAs entering into the fray with challenging questions and investigations following concerted pressure from ESMA and potential signs of a delegated reporting timebomb too. While the SFTR Review may be subject to further delay, regulators such as the UK FCA have been keen to draw our attention to SFTR.

FCA Market Watch 81 – what does it mean for SFTR?

Earlier this month, the FCA released Market Watch 81 which primarily focused on MiFID transaction reporting requirements however it made it clear that it would also be of interest to firms subject to UK EMIR and SFTR. 

The newsletter contains a rich seam of statements that in our anecdotal experience apply equally to SFTR. To let Market Watch do the talking…

“We continue to identify incomplete and inaccurate transaction reports,” with complaints about issues re-occurring post remediation, poor change management, data governance, control frameworks and oversight.

Perhaps most poignant of all from an SFTR perspective was the statement:

“Data quality issues can also emerge where change processes are outsourced to third parties, and there is inadequate oversight over the scope of deliverables. This can be worsened by the absence of transaction reporting subject matter expertise within the firm.”

Furthermore: “We have identified firms who have excluded services and data provided by third parties from their control and reconciliation framework. This can create gaps in monitoring and prevent firms from identifying issues originating outside the firm.”

The FCA also stated:

“Limited compliance oversight over transaction reporting can hinder firms from improving their reporting processes through independent advice and challenge.”

Of course, a layer of independent quality assurance through regulatory testing (such as our ReportShield Accuracy Testing) would ensure that regulatory reports are subject to a fully independent challenge.

“Staff turnover and absences can also affect data quality. We have identified data quality issues including failure to report transactions where key staff dependencies exist, and there are not clear policies and procedures to manage reporting in their absence.”

Again, outsourcing elements of your controls environment and oversight not only helps counteract key person dependencies but also mitigates against any inadequacies in policies, procedures and change management.  

Don’t rest on your laurels

Governments and regulators are currently on edge for understandable reasons. Excuses for incomplete or inaccurate reporting of the very regulations (SFTR, EMIR, CFTC etc) implemented in mitigation of the global financial crisis have been exhausted. The onus is now on firms to ensure complete, accurate and timely reporting or start to face the wrath of emboldened regulators across Europe, North America and globally. This is no time for resting on your laurels.  

Our ReportShield solutions are designed to directly address the controls issued raised in Market Watch 81 – to request a demo or for a conversation with one of our regulatory experts, please get in touch.