A six-week window to respond to 145 questions on the EU’s SFTR regulation has been criticised by industry stakeholders.

ESMA, the main regulatory body behind upcoming rules forcing firms to report details of their securities financing transactions, sent out a consultation paper earlier this year. 

However, the watchdog placed an April deadline on responses to the 187 page report which covered data, reporting, trade types and a range of other factors.

Responses were published this week.

Experts at asset manager Amundi said they were “surprised” to see that stakeholders had been offered only six weeks to comment.

“It is a very comprehensive work with 145 different questions that cannot be properly discussed internally in such a short timeframe,” the asset manager wrote in its response.

The timing was “unfortunately extremely limited” , the European Fund and Asset Management Association (EFAMA) added, writing that it was “impossible” to properly discuss the full range of issues in such a short time frame.

Meanwhile ISLA, the securities lending trade body, said that it had “restricted” its responses to specific securities lending questions mainly due to the “limited time made available” to review ESMA’s discussion paper.

Market participants are having to implement a wide range of regulations globally, each carrying their own costs and critical impacts on company and client business models.

SFTR is the EU’s attempt to align securities finance reporting with EMIR and MiFIR and put in place a regime that operates in harmony with the wider international work on OTC derivatives.

Once in force, it requires all securities loans, repos, reverse stock loans, buy and sell back and similar operations to be declared to an EU trade repository. 

Fund managers must also inform investors of their use of these types of deals. 

In addition, SFTR also imposes conditions on the 'reuse' of financial instruments which have been provided as 'collateral'.

Although most market participants support the basic objectives, ESMA’s proposals have drawn criticism.

“We expect that the implementation of SFTR reporting, as currently contemplated, will result in a considerable amount of data that may not be practically reported and will represent a significant cost for all market participants,” derivatives exchange CME wrote in its response.

Experts at Markit recommended that ESMA “ensure the final rules are proportionate and workable” so they do not damage activity in the securities finance industry and negatively impact liquidity in underlying market.

Daniel Trinder, global head of regulatory policy at Deutsche Bank, voiced his concerns on collateral re-use. 

“Collateral re-use is very difficult to calculate at the transaction level and provides little value. Any re-use calculation performed to provide data should be done at the firm level (receiving the collateral) and not at counterparty level.

"It should also be calculated across all SFTs and not done for individual SFTs independently," Trinder added.

Hedge fund body AIMA shared concerns on reporting.

“Fundamentally, the most significant and – in our opinion – unnecessary operational cost associated with SFT reporting is the two-sided nature of the reporting requirement,” wrote AIMA chief Jack Inglis.

“A single-sided reporting hierarchy to deem the relevant reporting counterparty for a transaction, with a tie- break logic should two counterparties of the same category transact with one another, would be the preferable solution," he added.

ISLA also wrote that is important to recognise that securities lending operates around some “very different fundamentals” to those typically seen in the derivatives world. 

“These differences do, we feel, create a natural tension between the development of an EMIR like reporting regime and the way in which securities lending operates in practice.”

ICE Clear Europe had several concerns. It's main comment was that CCPs are significant users of SFTs, as well as providing a role in clearing transactions.

However, there is no mechanism for SFT reporting to distinguish between cleared transactions and "CCP as user" transactions in ESMA's proposals.

"The rationale for SFT regulation cannot be CCP supervision because a CCP's regulators already have access to all the information referred to here under EMIR," ICE Clear Europe added.

"Replicating it in a trade repository to which different regulators have access has no purpose, rationale or benefit if those regulators are not the CCPs' supervisors.  

"Moreover, the Draft Rules should not place an increased reporting burden on CCPs that would have the effect of creating a shadow CCP regulatory regime."

Experts at ICE also highlighted concerns that the requirement to report collateral re-use may be unworkable or render delegated reporting unworkable.  

"The draft rules contemplate, as is currently the case in the market, the counterparties delegating their reporting obligations under the SFTR to their banks.  

"However, if the counterparties are required to report re-use of collateral, either on a transaction specific or entity level, they will not necessarily want to share information on the percentage of reuse of their securities with such banks/counterparties."

ESMA will use the responses to develop detailed rules on which it will publish a follow-up consultation in the second half of 2016. 

Draft rules for approval to the European Commission will be sent by mid-January,2017.