CSDs and securities financing

22 Apr 2016 – Future reporting requirements for securities financing transactions (SFTs) may involve the provision of information on CSDs as “places of settlement”. Commenting on the ESMA Discussion Paper issued on 11 March 2016, ECSDA outlines a couple of important considerations for ensuring that transaction reports are meaningful and consistent across SFT counterparties.

Among the many fields to be reported by counterparties in securities financing transactions (SFTs) in the future, “place of settlement” and “CSD” will have to be populated by a Legal Entity Identifier (LEI) in transaction and counterparty data reports respectively. Before the reports are implemented, it would be helpful if ESMA could specify more in detail the criteria to be used for populating these fields. In particular, consideration should be given to scenarios with multiple securities being part of the same SFT, where the loan or the collateral are settled across multiple infrastructures, or where the collateral consists in a basket of securities.

Likewise, instances where the “indirect CSD participant” (client of a CSD participant) needs to be reported instead of the direct “CSD participant” need to be specified.

More generally, the role of CSDs in SFTs should be accurately reflected in the upcoming technical standards. Some of the wording used in the ESMA Discussion Paper is misleading and it is important to recognise the unique role played by CSD in reducing risk in the SFT market.

Read the official response of ECSDA to the ESMA Discussion Paper