The Securities Financing Transactions Regulation: Regulation (EU) 2015/2365
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SFTR requires in-scope counterparties to report their securities financing transactions to a trade repository by the next working day, subject to the exemptions in Article 2. Under Article 4(3), the management company reports for a UCITS it manages and the AIFM reports for its AIF. Articles 13 to 15 also set what fund reports and prospectuses must say about these transactions and total return swaps, and the conditions for reusing collateral. Under Article 33 the regulation is directly applicable. The consolidated text states that it has no legal effect; the Official Journal act is the authentic text.
Scope and the core mechanism
Article 2 brings UCITS management companies and authorised AIFMs into scope. Article 3(11) defines a securities financing transaction (SFT) as one of four types. They are repos, securities or commodities lending, buy-sell backs and margin loans. Article 3(3)(d) makes an authorised UCITS, and where relevant its management company, a financial counterparty. Article 3(3)(e) does the same for an AIF managed by an AIFM authorised or registered under AIFMD.
Three separate duties follow, each with its own start date. Article 4 is the transaction reporting duty. Articles 13 and 14 are investor disclosures that only funds carry. Article 15 governs reuse of financial instruments received as collateral, within the territorial scope and exemptions of Article 2. Total return swaps sit inside the fund disclosures but outside Article 4, because Article 3(18) defines them as derivatives under Regulation (EU) No 648/2012.
In practice: under Article 33(2)(a)(iii), the reporting duty for UCITS and AIFs applied 18 months after the reporting RTS entered into force. Delegated Regulation 2019/356 was published on 22 March 2019 and entered into force 20 days later, so the duty applied from 11 October 2020, a Sunday. ESMA's reporting guidelines (section 4.1) apply the T+1 rule to such dates, so the first reports fell due on the next working day.
Key provisions
| Provision | What it says | The practical point |
|---|---|---|
| Reporting (Art. 4(1)) | Counterparties report each SFT, and any modification or termination, to a registered or recognised trade repository no later than the working day after the event. | The deadline is T+1 on a working-day basis for new trades, lifecycle events and terminations alike. |
| Who reports for a fund (Art. 4(3)) | The management company reports for a UCITS it manages, and the AIFM reports for its AIF. A self-managed UCITS reports as the counterparty under Art. 4(1). | Where the AIFM is not subject to SFTR, the duty stays with the fund (ESMA guidelines, section 4.4). Article 4(2) allows delegation of the submission, not of the duty. |
| Record keeping (Art. 4(4)) | Records of each SFT are kept for at least five years after the transaction ends. | The five years run from termination, not from trade date. |
| Periodic reports (Art. 13, Annex Section A) | UCITS half-yearly and annual reports, and the AIF annual report, show the fund's use of SFTs and total return swaps. Applies from 13 January 2017. | Section A lists the data: the ten largest collateral issuers, the top ten counterparties, maturity buckets, reuse and the split of returns and costs. |
| Prospectus and investor disclosure (Art. 14, Annex Section B) | The UCITS prospectus and the AIFMD Article 23 disclosure name the SFTs and total return swaps the manager may use. They must state clearly that these are used. | Section B requires the maximum and the expected share of assets under management for each type, plus counterparty and collateral criteria. |
| Reuse of collateral (Art. 15) | The provider must first be told in writing of the risks, including on the receiver's default. It must then sign prior consent to a right of use under a security collateral arrangement, or expressly agree to a title transfer arrangement. | Reuse follows the agreed terms and is shown by a transfer from the provider's account. Where a party and the account sit in a third country, other appropriate evidence suffices (Art. 15(2)). Applied from 13 July 2016. |
| Sanctions (Art. 22, Art. 28) | National sanctions cover breaches of Articles 4 and 15. Breaches of Articles 13 and 14 fall under the UCITS and AIFMD sanctions regimes. | For Articles 13 and 14, the competent authority is the UCITS or AIFMD authority of the management company, investment company or AIFM (Art. 16(1)(c)–(d), 16(3)). |
In practice: the Annex sets two separate measures. Section B requires the prospectus to state the maximum and expected proportion of assets under management subject to each transaction type. Section A requires the reports to show the share of collateral received that is reused, "compared to the maximum amount specified in the prospectus". Only the reuse figure is set against a prospectus maximum by the text itself.
Amendment history
| Date | Instrument | What changed |
|---|---|---|
| 25 Nov 2015 | Regulation (EU) 2015/2365 | Adopted; applied from 12 January 2016, with later dates for Articles 4(1), 13, 14 and 15 (Art. 33). |
| 13 Dec 2018 | Delegated Regulation (EU) 2019/356 | The RTS on the details of SFT reports. Its entry into force set the phased Article 4(1) start dates. |
| 30 Jan 2019 | Delegated Regulation (EU) 2019/463 | Added the UK central bank and UK public debt bodies to the Article 2(2) exemption from Articles 4 and 15. |
| 16 Dec 2020 | Regulation (EU) 2021/23 | Added resolution authorities to the bodies with access to trade repository data (Art. 12(2)(n)). |
| 13 Dec 2023 | Regulation (EU) 2023/2869 | Inserted Art. 32a: from 10 January 2030, the aggregate positions repositories publish under Art. 12(1), and specified sanction and supervisory information, go to the European single access point. Individual transaction reports are not made public. |
What it works with
SFTR adds to the fund regimes rather than replacing them. Article 13 attaches to the reports in Article 68 of the UCITS Directive and to the annual report in Article 22 of AIFMD. Article 14 attaches to the UCITS prospectus and the AIFMD Article 23 disclosure. In Luxembourg the UCITS rules sit in the Law of 17 December 2010 (summary) and the AIFMD rules in the Law of 12 July 2013 (summary). In Ireland they sit in S.I. 352/2011 (summary) and S.I. 257/2013 (summary). An AIFM's Annex IV report to its national regulator is a separate return under AIFMD Article 24. It does not discharge the Article 4 trade repository filing, and the reverse also holds. For small managers, see sub-threshold AIFM registration by jurisdiction.
In practice: a fund that lends securities through an agent lender produces three outputs from the same trades. The first is the T+1 trade repository report under Article 4. The second is the Section A data in the UCITS half-yearly and annual reports, or the AIF annual report (Article 13). The third is the Section B data in the UCITS prospectus or the AIFMD Article 23 investor disclosure (Article 14). That includes the maximum and expected proportion of assets under management on loan. Section A also splits returns and costs between the fund, the manager and third parties such as the agent lender.
To verify
- Section A and B RTS: whether ESMA has used the optional powers in Articles 13(3) and 14(3) to further specify the Annex, per the Official Journal.
- Review outcome: what the Commission's report under Article 29 concluded, and whether any amending proposal followed.
- Reporting format: the field list and format in force, per Implementing Regulation (EU) 2019/363 and any later amendment.
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