European securities watchdog ESMA laid out the long-awaited final implementation details for the Securities Financing Transaction Regulation (SFTR) on Friday.

After recent delays, a final draft was published at the end of the week, giving lenders and borrowers an idea of what they ultimately have to contend with.

Similar to derivatives reporting under EMIR, SFTR will require details of repos, stock or margin loans and collateral re-use to be sent to a registered trade repository. 

The final standards will now be passed back to the European Commission for final approval by 30 June.

Market participants are already going through ESMA's document with a fine-tooth comb and the initial reactions appear to be mixed.

Speaking to Global Investor/ISF, ISLA’s Andy Dyson said that it will take some time to fully understand the detail behind the document.

On first glance, he said he is delighted that ESMA have acknowledged the challenges faced by market participants around the reporting of non-cash collateral - which has been adjusted to value date + 1.

“In these final technical standards published today ESMA have extended the reporting of non-cash collateral from settlement date to settlement date plus one which will allow our members to properly report this important data component,” Dyson told Global Investor/ISF.

Pirum's Rob Keane said that he recognised that ESMA have listened to the market, particularly with regards to items such as collateral reporting. 

However, he added that it is clear that a lot of the concerns raised by market participants and infrastructure providers have not been addressed. 

"For example, introducing additional message types adds more complexity to the technical implementation and the large number of fields subject to reconciliation with a zero tolerance will inevitably mean a high percentage of transactions are unlikely to be matched at the trade repositories unless matching and reconciliation occurs pre-reporting," he told Global Investor/ISF.

ESMA also included a cost-benefit analysts in its report on Friday and acknowledged that the number of reporting fields is considered disproportionately burdensome by many stakeholders.

The regulator expects the incremental impact on transaction costs due to SFTR compliance will be a small fraction of a basis point.

It added that any reduction in trading volume may, in part, be explained by its shift to other jurisdictions, particularly the USA, where the perceived regulatory burden is lower.

One-off costs could  also be amplified by constraints on existing IT resources, due to the need to meet other concurrent regulatory requirements (e.g. MiFID II and CSDR).