Shearman & Sterling LLP | Financial Regulatory Developments Focus | European Commission Requires Drafting Amendments to Proposed Technical Standards for Reporting of Securities Financing Transactions
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  • European Commission Requires Drafting Amendments to Proposed Technical Standards for Reporting of Securities Financing Transactions
    07/27/2018
    The European Commission has published a Communication announcing its intention to adopt, with amendments, the Regulatory Technical Standards and Implementing Technical Standards prepared by the European Securities and Markets Authority under the Securities Financing Transactions Regulation. ESMA submitted final draft RTS and ITS to the Commission in March 2017.

    The Commission has amended the draft RTS on the details of Securities Financing Transactions to be reported to Trade Repositories and the draft ITS on the format and frequency of reports on the details of SFTs to TRs. The draft RTS and ITS had contained wording to the effect that ESMA would have the power to endorse global unique trade identifiers for transactions or the global legal identifier system as it applies to the branch of an entity. This wording would have had the effect of delegating regulatory powers on potential future reporting requirements directly to ESMA, which is not possible under the legal framework for the European Supervisory Authorities. The Commission has made amendments to clarify that the Commission, rather than ESMA, has the responsibility to introduce changes to the reporting requirements, on the basis of a proposal by ESMA.

    ESMA will have a six-week period in which to re-submit the draft RTS and ITS in the form of a formal opinion, after which the Commission may adopt the amended technical standards.

    Although the issue over the wording referring to endorsement by ESMA only came to light during the Commission's consideration of ESMA's draft RTS and ITS for the SFTR, to ensure legal certainty and consistency, the Commission also asks ESMA to submit a proposal amending Commission Implementing Regulation (EU) 2017/105, which sets out ITS for the format and frequency of reports to TRs under the European Market Infrastructure Regulation, to remove similar references within that Implementing Regulation to "endorsement by ESMA."

    The Commission proposes to adopt - without amendments - the draft RTS and ITS submitted by ESMA on: (i) the registration and extension of registration of TRs under SFTR (and a linked amendment to related RTS under EMIR); (ii) operational standards for data collection, data aggregation and comparison, public data and details of SFTs; (iii) procedures and forms for submitting information on sanctions and measures; and (iv) access levels and terms of use under the SFTR (and a linked amendment to related RTS under EMIR). However, cross-references in the legal texts mean that these further RTS and ITS can only be adopted jointly with the draft RTS and ITS ESMA has been asked to amend. Accordingly, all of the RTS and ITS will be adopted together in due course.

    View the Commission Communication.

    View the letter to ESMA.

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