As previously reported, the Securities Financing Transactions Regulation (SFTR) came into effect on 12 January 2016, with transitional periods for a number of its provisions. One of these was the requirement under Article 13 that UCITS management companies, on behalf of the UCITS which they manage, and UCITS investment companies, inform investors of the use of securities financing transactions (SFTs) and total return swaps (TRS) in the half-yearly and annual report of the UCITS. Likewise, authorised AIFMs are required to inform investors of the use of SFTs and TRS, by the AIF which they manage, in the annual report of their AIF(s). Article 33(2) (b) of the SFTR provides that Article 13 shall apply from 13 January 2017.

What transactions are affected?

The SFTR affects TRS and the following SFTs:

  • Repos, to include reverse repos, and buy-sell backs. Repos are a means of securing cash loans with bonds or shares as collateral.
  • Securities lending, which involves shares or bonds being lent against cash collateral.
  • Commodities lending, which involves commodities being lent against cash, typically in order to obtain secured financing.
  • Margin loans in connection with the extension of credit for the purchase, sale, carrying or trading of securities, but excluding any other cash loans secured by securities.

With the transitional period drawing to a close, the relevant data, as set out in the table below, should be gathered for inclusion in periodic reports issued from 13 January 2017.

Please click here to view table.