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Securities Financing Transactions in Rapptr

 

Overview

Rapptr uses a number of properties to accurately capture disclosure requirements for Securities Financing Transactions (SFT). Few general statements can be made regarding SFT assets due to their complex nature. This article explains the properties used in Rapptr to automate disclosure requirements for SFT.

I. Identifying SFTs by type

The asset property SFTType (Securities Financing Transaction Type) accounts for various kinds of transactions, such as lending, borrowing, repos, reverse repos, while also allowing for general collateral taken and collateral given.

Available values (types of SFT):

  • Normal - standard position, held outright (not part of a SFT);
  • Lent - lent side of a securities lending transaction;
  • Borrowed - borrowed side of a securities lending transaction;
  • CollateralTaken - collateral taken from another counterparty as one of the legs of a repo, reverse repo, the collateral side of a lending/borrowing transaction or other collateral in SFTs;
  • CollateralGiven - collateral given to another counterparty as one of the legs of a repo, reverse repo, the collateral side of a lending/borrowing transaction, or other collateral in SFTs.

Using this basic framework, you would represent the following SFT examples as follows:

Type of transaction

SFTType for leg 1

SFTType for leg 2

Lending 

Lent

CollateralTaken

Borrowing 

Borrowed

CollateralGiven

Repo

CollateralGiven (securities)

CollateralTaken (usually cash, can be securities)

Reverse Repo

CollateralTaken (securities)

CollateralGiven (usually cash, can be securities)

Other (e.g. margin loan)

CollateralGiven

CollateralTaken


Every securities financing transaction has two legs which can be expressed in the most simple form as a collateral taken and a collateral given (see ESMA’s SFTR consultation paper section 4.2.3 on this topic). Both legs of repos and reverse repos would fall under either collateral taken or collateral given category in our initial data specification. We understand that it might be unconventional to think of the cash received in a repo as collateral taken, for example, but the concept of both legs of the transaction would still hold.

 II. Additional asset properties

 

Properties

Description

SFTType

Jurisdictions

HasTransferOfTitle

Boolean (TRUE or FALSE)

If set to TRUE, indicates that the legal title of the security is transferred in the SFT transaction, as determined by the relevant legal agreements. Setting this to FALSE indicates the collateral includes no transfer of title (that which is just a pledge/lien of assets would fall into this category).

Note: standard practice in securities lending agreements is that the title is transferred.

Lent

Borrowed

CollateralTaken

CollateralGiven

All

HasTransferOfVotingPower

Boolean (TRUE or FALSE)

If set to TRUE, indicates if the power to exercise the voting rights of the assets is transferred in the SFT transaction, as determined by the relevant legal agreement.

Lent

Borrowed

CollateralTaken

CollateralGiven

All

HasIntentionToExerciseVotingRights

Boolean (TRUE or FALSE)

Indicates whether a collateral taker has the intention to exercise the voting rights attached to the securities transferred, or not.

CollateralTaken
CollateralGiven

Germany, Gibraltar, Ireland, Malta, Poland, United Kingdom

AuthorisedLendingAgreement

Comma-separated list of values (country codes). Valid values: MY, PH, TH.

Accounts for various exemptions, i.e. if the stock borrowing and lending arrangements are covered under and comply with the special requirements provided by the regulators. See the rules from the Jurisdictions mentioned for details on each exemption before setting.

Lent
Borrowed
CollateralTaken
CollateralGiven

Philippines, Malaysia, Thailand

 

It is assumed that a lender will always have a right to recall lent securities; therefore there will no property explicitly accounting for that.

Please see the example of the updated rule that includes securities financing transactions below.

III. Timing and sourcing the data

Since regulations require securities financing transactions (SFT) to be identified along with normal portfolio positions, Rapttr expects the data related to SFT to be delivered on a trade date (T), in the same way data for other positions is delivered. This will likely require coordination with your securities lending department/agent, prime broker, collateral management group, or others responsible for identifying this data on a daily basis.

IV. Positions file

Accounting for securities financing transactions in our rule package has an impact on the positions file you upload to Rapptr.  Please see the example of the input file, which shows a precise breakdown of how the position quantities should be supplied. 

In the example, some quantity of the same asset is held outright (normally bought on the market), some of it is borrowed, and some has then been lent on further. The idea here is to represent the same security with different SFTTypes in separate lines, with different AssetIds. However, they share the same InstrumentId property. Please contact support@fundapps.co if you have any further questions regarding the revised positions file in Rapptr. 

 

 

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