Error (EROR) - Transactions Cancelled on Day of Booking

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

Question:
Is there any definition around reporting of transactions that are subsequently cancelled same day, vs a transaction that was legitimately booked, but terminated later that day?

It is our understanding that the former would not be reported at end-of-day, whereas a NEWT and an ETRM would be reported for the latter scenario.

Is the common understanding that all instances of transactions should be reported, regardless of the motivation for terminating the trade? Or indeed the opposite, transactions are not reported if they are terminated same-day?

Best Practice:
In all cases, pending loans when cancelled should be reported as EROR messages; regardless of reason. It was opined that there are only two legitimate reasons to cancel a loan; genuine, bilateral, business reasons and unilateral operational reasons (erroneous trade entry, for example).

To send a different template for each would mean that vendors or proprietary system owners would have to build in additional logic, where none currently exists, to allow users to apply a reason as to why they were cancelling loans. The application of this selection process is dependent on human intervention and would almost certainly contain user error on numerous occasions.

The EROR template message should be used to report all loan cancellations and ISLA have given this feedback to ESMA in the formal Response Form to the Consultation Paper under Articles 4 and 12 SFTR: May 2020 and we have received no push-back to date. An ETRM will only be sent for the full and/or final partial return of a settled open-term loan.

See ESMA Guidelines Reporting under Articles 4 and 12 SFTR 06 January 2020 ESMA70-151-2838

60. Table 46 illustrates the population of reporting fields in case of a cancellation of a wrongly submitted entire report where the SFT never came into existence or was not subject to SFT reporting requirements, but which was reported to a TR by mistake. The level, i.e. transaction or position, at which the SFT is reported is irrelevant for this use case, as Field 2.99 (Level) is not applicable for this action type. (SFTR-243)