Pricing Mismatches due to Tolerance

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Status: For Review, Last Updated: 31/08/2023

Question:
Validation Field(s) in scope – 2.49, 2.56 & 2.57

There is no tolerance on Fields 2.49 (Security and Commodity price) and 2.56 (Loan Value) and Field 2.57 (Market Value) has an extremely strict tolerance of 0.000005. Matching dates for these fields commence on 1^st^ of January 2023.

ISLA members note two major concerns regarding these matching fields:

•The Level 3 guidance will cause large amounts of breaks when reconciliation on these fields begins on 1st January 2023 where ‘Loan value’ (2.56) and Loan ‘Market Value’ (2.57) are reconciled by the TRs.

•The Level 3 guidance to use ECB FX rates for SFTR reporting was unexpected by the industry and still challenging for firms to implement even after SFTR went live.

•A concern is raised that forcing price convergence in regulatory reporting may by incorrectly representing the  books and records of a reporting party. It is noted that centralised pricing was proposed and rejected during initial SFTR discussions.

Best Practice:
ISLA members proposed to have wider tolerances for the fields 2.49, 2.56 and 2.57 and suggested to bring up the tolerance levels at either of the four:

•0.025%

•0.050%

•0.075%

Or

•0.100% (SFTR-188)