Return Where Identical SFT Exists

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Status: Best Practice Finalised, Last Updated: 26/04/2021

Question:
In the event that a loan/borrow is called in, where two identical outstanding positions exist, how do counterparts guarantee that it is applied to the correct UTI and therefore avoid mismatching?

Best Practice:
There is a potentially small issue with returns, detailed in the following scenario:

There are two identical borrows/loans between the same counterparties, which are vs. the same commercial details but different UTIs.

When the borrower books a full or partial return, there is a risk that the return booking event will mismatch the UTI, i.e. both counterparts will potentially book returns in their systems to different SFTs; linking to different UTIs.

A possible solution would be for industry best practice to agree that in such situations, with multiple trade booking vs same ISIN/Same Fee/Rebate, the earliest trade booking should be returned first.

In the above scenario, recommended best practice is to clarify which UTI participants should book the return against, if unsure.

It is however recognised that this may be problematic for many firms to allocate the correct return to the relevant UTI, due to the additional development burdens of implementing SFTR. (SFTR-242)