Legal

Korea Securities Depository (KSD) Auto Borrow Program

Status: Best Practice Finalised, Last Updated: 26/04/2021

Question:
How should Korea Securities Depository (KSD) auto borrow SFTs be reported?

Best Practice:
Any members who subscribe to the KSD auto borrow program should refer to their legal agreements, reviewing their Know-Your-Client (KYC) process, and take an informed view as to who they are facing.

The KSD will not provide a breakdown of the beneficial owners and, as such, participant members are of the view that they should report such loans from the KSD as a Principal Lender. This is down to the fact that the KSD guarantees the borrower's performance and the ambiguity in reporting, (i.e. the barrier they have with the KSD not being in the position of disclosing their counterparty for settlement). (SFTR-340)

Street Side Term Trades

Status: Best Practice Finalised, Last Updated: 26/04/2021

Question:
Where there is a term trade agreed between borrower and agent lender but the underlying loans at beneficial owner level are open and clients can sell out of positions, how should these be reported?

Best Practice:
The ISLA Working Group has agreed that the answer is subjective, dependent on a firm's legal perspective and the how, within the agreement, term dates are applied (i.e. whether at the shell notional trade level or the beneficial allocation reporting level of the trade). (SFTR-288)

Pledge GMSLA Reporting

Status: Best Practice Finalised, Last Updated: 28/09/2021

Question:
How should SLEB under a pledge GMSLA agreement be reported under SFTR?

Best Practice:
All SFTs under pledge agreements should be reported under SFTR. All pledged collateral must be reported using a COLU template message and, if the collateral is being re-used for short covering or any other purpose, it would further need reporting under table 4 for collateral re-use.

The use of the GMSLA Pledge should be reported using the following logic;

• Field 2.09 (Master Agreement Type) = "GMSL"

• Where applicable, Field 2.20 (Method used to Provide Collateral) = "SICA" (SFTR-263)

New Legal Agreement for Outstanding SFTs

Status: Best Practice Finalised, Last Updated: 26/04/2021

Question:
If a firm signs a new GMSLA with their counterparty, which supersedes an existing legal document, how should this be captured in reporting?

Best Practice:
When a new master agreement is signed, all open SFTs should be modified (MODI) to represent the repapering of the legal contract by which they are governed. This excludes any transactions that were fully returned on the date on which the contract was signed and should include all remaining balances after partial returns are applied.

Field 2.03 (Event Date) should equal the date that counterparts bilaterally agree the trade agreement was effective. The GMSLA does not have a specific reference to 'date-signed' and can therefore be on different dates, as counterparties do not usually sign documents together. This may be different with electronically signed documents.

Counterparts should take care to align this practice as, quite often, the annotation of the legal trade agreements to transactions is not prevalent in all trading systems nor attributable to a single SFT.

Field 2.09 (Master Agreement Type) is a mandatory, matching, field but not part of the construct of the UTI Exchange Fields/Minimum Data Provision file, therefore; a timely correspondence of this data is imperative should counterparts wish to match at the TR to avoid requiring back-dated modifications.

Fields 2.10 (Other Master Agreement Type) and 2.11 (Master Agreement Version) are both conditional and non-matching, if applicable.

The end-of-day COLU template message also contains the master agreement fields, therefore these should correlate to reported SFTs. (SFTR-229)