- UTIs for CA bookings - Unique Trade Identifier, who generates them, how and when?
- Omni/ Bookings - What does SFTR mean for CA bulk bookings models?
- Booking Dates - How the trade and settlement date affect SFTR reporting.
- Execution Timestamp - Why is this NEWT field required and how is it determined?
- Interim Securities - Are these temporary lines important to report or not?
The following Matrix demonstrates the report activities which are affected by the issues identified: (Click here to view) (COAC-126 FOR ISLA REVIEW)
- Some corporate actions will require a UTI to be assigned to the new trade for SFTR reporting.
- This applies to all new trades which are then subsequently reported under a NEWT message to the TR.
- UTI Creation should be in adherence with the IOSCO recommendations 2.
- Borrowers and lenders should agree at a relationship level, who will be responsible for UTI creation of all transactions under a securities lending agreement.
- It is expected that in most circumstances the lender will assume the responsibility of UTI creation unless the lender is unable to.
- As data is likely to flow from lender to borrower but less likely to flow the other way, it is expected that in most cases it will be the entity that is mostly a lender in the relationship (or its agent) who creates the UTI.
- The entity responsible for UTIs will create the UTI for all transactions, including where the underlying beneficial owner is a Non-Financial Counterparty or an entity that does not have a reporting obligation.
- The ISLA workflow, as part of the main SFTR Best Practice, which can be found on the ISLA website, is designed so that the lender is the UTI Creator at every opportunity
- The same practices applied to the creation of a UTI on the parent SFT trade, are to be applied to the corporate action.
- If a firm has created the UTI for the parent, they will be responsible for the UTI on the new corporate action trade. Example: (Click here to view) (COAC-115 FOR ISLA REVIEW)
Corporate Actions teams can continue to make block bookings at an agent level, but the reporting of the CA activity must be reported on an LEI level, matching the beneficial owners' allocations as provided either directly by the Agent Lenders or via vendor platforms. Please refer to ISLA's SFTR Best Practice resources for further breakdown.
Example: (Click here to view) (COAC-121 FOR ISLA REVIEW)
- Typically, corporate actions for SFTs are either booked on the announced Ex-Date or Pay Date, with the Trade and Settlement dates in-line with the Pay Date of the event.
- As SFTR reporting is driven by T+1, firms reporting different trade dates, will cause single sided breaks at the TR between the booking times.
- Regardless of internal booking practices: one constant is that the pay date for all in-scope event types, for all markets, is the settlement date of the loan or SFT.
- It is therefore the agreed best practice, to follow normal booking procedures, but adjust the SFTR reporting fields: 2.3 "Event Date" and 2.13 "Value Date" to both equal the Pay Date.
- This practice does not require firms to amend their individual booking process, just to report alike on the corporate action activity. Example: (Click here to view) (COAC-130 FOR ISLA REVIEW)
- All new trades will require a NEWT message to be sent which includes an execution timestamp.
- The execution timestamp must be matched to within an hour.- Currently, CA bookings are booked as and when operational teams are processing them. This is often donemanually and in isolation between counterparties.
- There is no official execution time for a CA booking, because it is merely a downstream effect of an event and not a new 'trade' - however these effects are reported as trades to the TR.
- All CA bookings should have the Execution Timestamp field (2.12) populated as follows:
i) Where the data provision to borrowers is provided by undisclosed agent lenders, the Execution Timestamp (2.12) should be aligned to that provided by the agent lender or,
ii) Where no explicit bi-lateral agreement exists (which might otherwise indicate the provider of the execution timestamp for corporate action bookings), the timestamp should be standardised, with the "Time" part equal to 01:01:01 and the "Date" part equal to the Pay date of the event.
- The Execution Timestamp should be dated with the Pay date of the event. Example: (Click here to view) (COAC-124 FOR ISLA REVIEW)
- Many corporate actions which result in a new line of asset or cash payment, will produce a temporary or interim security, as a result of the CA which is replaced by the new asset, or cash on payment date.
- As per the ISLA working group, it was noted that a greater percentage of firms do not book interim (ineligible or non-tradable) securities in their internal systems at all, accounting for them in other ways.
- For firms that do book interim securities, if one firm reports to the TR, it will create a single sided trade and hence a break.
- ISLA's working group determined a universe of all types of interim securities, which could be the result or temporary result from a corporate action and agree the reportable characteristics of each type of Interim security as referenced in tables 2 & 3 in the appendix.
- With reference to the table on the following page; some interim securities will need to be reported and some should be supressed for reporting to the TR however, the effect on daily collateral will be mitigated by the fact that the total position will comprise the value reported to the TR.
- Those parties who book the interim security will reduce the value of the original line, and those firms not booking an additional line will reprice the original SFT until pay date, when the new security line is booked.
- Therefore, as in the example shown below, Firm 1 and Firm 2 will both report matching collateral values, only Firm 3, which neither books the coupon nor re-prices the original holding, would be in error and break at the TR on their daily COLU report.
- In all cases, the SFTR report on Pay Date (Trade and Settlement +1) will be in line as outlined on the next page: Example: (Click here to view) (COAC-127 FOR ISLA REVIEW)
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