Haircut or Margin

Field 2.89 | Matching Date: 2020-04-01 | Tolerance: Up to third digit after decimal. | Agent Lender Data Provision: Yes>

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

Field 2.89 | Matching Date: 2020-04-01 | Tolerance: Up to third digit after decimal. | Agent Lender Data Provision: Yes

Description:
For securities lending: collateral haircut, a risk control measure applied to underlying collateral applied either at ISIN or portfolio-level whereby the value of that underlying collateral is calculated as the market value of the assets reduced by a certain percentage

Best Practice:
If Field 2.75 is populated with "SECU" or "CASH", a value (x11 numerical characters including up to x10 decimals) shall be provided, otherwise, it shall be left blank. This field allows negative values.

The FSB and BCBS framework does not apply to SLEB. The ISLA SFTR Working Group agree that the calculation in the Level III could not be used as it assumed that all collateral was applied with the same haircut, which it does not.

Instead a risk profile (schedule) is applied to different asset classes (type) and country of registration (market), which results in different haircuts being applied. Therefore, recommendation is to not use the ESMA calculation and instead use the following, referring participants towards their legal agreements for haircut details and applied at a 'per ISIN' basis. Therefore this field should be reported as the margin percentage, for example;

For a 95% haircut, this field should be populated with '5'. Where no haircut is added this field should be reported as 0.

ESMA Guidelines Reporting under Articles 4 and 12 SFTR: 06 January 2020

335. For SLEB, Field 2.89 (Haircut or margin) should only include haircuts that apply to the collateral side. Margin requirements will instead be captured through the Field 2.88 (Collateral Market Value) and the Field 2.76 (Cash Collateral Amount). Thus, the collateral market value and cash collateral amount should also be updated with any add-ons (i.e. loan mark-ups, that start applying in the course of the transaction). (SFTR-109)