SFTR Questionnaire (Returns and Reconciliations)

This SFTR survey covers two key topics currently being discussed by the ISLA SFTR Working Group.

Reporting Returns

In the final ESMA guidelines of January 2020, ESMA presented a changed view of how to report returns under SFTR. ISLA believed this method of reporting returns was incompatible with agency lending products and represented a significant change to ESMA’s previous position. Therefore, ISLA devised best practice which was contrary to the best practice ESMA presented within their guidelines.

The purpose of this section of the survey is to ascertain which method of best practice ISLA member firms and their counterparties are using to report returns. We also want to understand if their viewpoint has changed since we ran a similar survey in November 2020.

Current ESMA Best Practice

1) Partial Returns = Reported on a contractual basis (i.e. contractual settlement date + 1) ignoring settlement failure in the market.
2) Future dated full Returns = Reported on a contractual basis (i.e. date of agreement + 1) by sending a MODI to add a ‘Maturity date’ and mark the trade as fixed term, rolling the ‘Maturity date’ each day if the settlement fails.
3) Same day full returns = Reported on an actual basis (i.e. actual settlement date + 1) by sending an ETRM.

Current ISLA Best Practice

1) All returns (partial or full) reported on an actual-settlement basis and not contractual (therefore no need for advising failed status reporting).
2) Partial returns will report a MODI (reducing quantity)
3) Full returns for open-term will report an ETRM (closing SFT/UTI).
4) Full returns for fixed-term will not be reported (TR will automatically close SFT/UTI).
5) Settlement failure for full return of fixed-term will report a MODI, extending the maturity date, repeated until settlement.

Reconciliations Reporting

The purpose of this section of the survey is to understand the timing of individual firm’s reconciliations processing in order to inform ISLA best practice and help resolve issues surrounding Trade State Reports (TSRs).