Market Value (Loan)

Field 2.57 | Matching Date: 2023-01-01 | Tolerance: 0.000005 | Agent Lender Data Provision: Yes>

Status: Communications Review, Last Updated: 20/02/2024

Field 2.57 | Matching Date: 2023-01-01 | Tolerance: 0.000005 | Agent Lender Data Provision: Yes

Description:
Market value of the securities or commodities on loan or borrowed.

Best Practice:
Market Value should be reported in the underlying currency of the security (note this will align with the loan value). If a Market Value is not available, the Loan Value should be used (see 2.57 Market Value: Paragraph 276 of the ESMA Guidelines). For further reference please see ESMA Guidelines Reporting under Articles 4 and 12 SFTR note:131.

The market value of the securities should be the one as at close of business of each business day, and it should be reported no later than T+1, reflecting the valuation used for collateral management purposes (e.g., to calculate daily variation margin).132.

Counterparties should report the market value of their SFTs using the market prices and FX rates that those counterparties have used during the course of that business day for exposure management purposes. For securities lending transactions, this would generally mean that the market values reported as at close of business on any given day would be the closing prices of the securities as of the previous business day and reported no later than T+1.139.

When an FX rate has to be used by a counterparty to submit an accurate valuation, the relevant ECB rate should be used. In the event an ECB FX rate does not exist for the conversion, counterparties should agree between themselves which FX rate to use for valuation and reporting purposes.

Challenge / Problem:
•Example where firms are submitting VALU messages before the intended settlement date as per below:
oThe opening leg has not yet settled (start date reported by both parties is in the future).
oSome counterparties do not generate VALU messages until the opening leg of the stock loan contract has
settled, hence some counterparties reporting shows “market value” as blank.
oHowever as shown in the below Party B are submitting VALU updates (and hence populating “market value”
field) prior to settlement of the opening leg.
oIn both instances where the intended settlement date is in the future, and also where the trade has failed on the
intended settlement date, therefore the opening leg is in a pending system status.

Reporting Counterparty	Other Counterparty	Type of SFT	Value Date (Start Date)	Market Value – Field LC.57
Party A	Party B	SLEB	2024-04-12
Party B	Party A	SLEB	2024-04-12	1,000,000

SFTR Best Practice Suggestion:
oTo note field 2.57 Market Value within the trade validation rules is an “optional” field for action types NEWT & CORR and is also a reconcilable field with a tolerance of 0.0005% required from the 11th January 2023 phase in.
oUpon the analysis and implementation of SFTR coming into force it was recommended by trade associations working groups and task forces that any “optional” field under SFTR as a best practice should be populated where reference data is available.
oWhere reference data is available do not leave any “optional” fields as BLANK when reporting.
oThis would infer that on a new SLEB NEWT reporting message field 2.57 – Market Value should be populated from the generated system booking and then any subsequent CORR or VALU messages to clearly show the latest market values.
oAlthough settlement driven reporting is an aspect of SFTR to “only” report fully returned / closed transactions when they actually settle in the market, in no other aspect of SFTR should reporting be held back or indeed blocked.
oAlthough billing accruals and margins are required under actual settlement this is driven from a business perspective and not an SFTR regulatory reporting perspective hence there is need for distinction and separation.
oAs action type VALU is a Mandatory reporting SL field this should commence from T+1, with no need / requirement to hold back valuations until opening trade legs have settled

(SFTR-77)