The value of securities finance data, soon-to-be-gathered from tougher reporting requirements on securities lending and repo trades, is being called into question by market participants.

SFTR, Europe’s clampdown on potential risks in the shadow banking sector, forces firms to report details of their securities financing transactions (SFTs) to trade repositories for the benefit of the regulators.

The obligation starts in 2018 and, according to market regulator ESMA, lays down the basis for the transparency of SFTs in the EU. However, certain industry players are starting to question the usefulness and true benefit of the information being gathered.

“I'm concerned that the regulators are asking for all this information and it’s a case of be careful what you wish for, you might just get it,”  a senior figure at a US custody bank told Global Investor/ISF, speaking on condition of anonymity. They are going to be overwhelmed. Personally, I would rather see them looking at exposures, not transactions. I don't see what transaction data tells you that exposures can’t.

"It might give you some information about market trends but then surely that can already be gathered by existing data providers,” the individual said, adding that, in his opinion, there is a political element to the rules and an attempt to achieve transparency for transparency's sake.

At a minimum, reporting must include the details of the parties, principal amount, currency, collateral assets, repo rate, lending fee, margin lending rate, haircut and maturity date. It is envisaged that the detailed information will need to be reported on each SFT. Firms have the option of using a third party to do this.

ESMA argues that currently the only data currently available is based on public data, surveys and commercial data providers. This, the watchdog adds, means the market lacks the coverage and granularity required to conduct a rigorous analysis of EU SFT markets.

Market participants across the industry, including trade body ISLA, are in regulator contact with ESMA and helping to refine the rules. Earlier this week, ESMA had to adjust revise the SFTR collateral reporting rules after feedback from market participants.

For the most part though, individuals in the securities finance market remain fairly supportive of the reform increased transparency. “The market is unique, that’s for sure, so EMSA may run into more implementation problems,” said a senior prime brokerage executive. 

"However, SFTR makes sense because it moves the market out in the open. Right now, many would argue it's behind the curtains. “It’s a major revolution. It gets the business away from being seen as shadow banking element. The biggest impact will be on infrastructure, so I think any help in terms of pulling together the reporting will be really important.”

In terms of costs, the expenses will probably fall to the agent lender one London-based securities services veteran told Global Investor/ISF. “This is one of those services that the beneficial owner community will expect their agent to provide. I get asked in RFPs all the time 'What are you doing about it? How are you going about doing it?'. I'm not being deliberately vague, but until the rules are out there I can't commit to what we're going to be doing. In the end, we will do everything we can for the client.”