Type of Collateral Component and Collateral Basket Identifier issues with NEWT template reporting

>

Status: Backlog, Last Updated: 15/02/2023

Question:
Validation Field(s) in scope – 2.75 & 2.96

Due to the re-introduction of the validation rules on 2.75 and 2.96, securities lending participants have implemented a practical solution for the reporting of NEWTs related to Net Exposure SLEB transactions. 

As these SFTs are collateralised by a pool of collateral, 2.75 and the associated fields for collateral are not applicable, therefore 2.96 must be populated in order for the ‘NEWT’ to pass the validation.

The industry is now obliged to report Net Exposure (NE) SLEBs with 2.96 = ‘NTAV’, which creates misleading data in both fields. However, this is not a true reflection of the submitter's books and records.

Members also draw attention to

Article 3 para 4 of the Commission Delegated Regulation 2019/356 starting “"A counterparty collateralising several SFTs on a net exposure basis..” which highlights a misalignment with current validations

Best Practice:
ISLA members propose that:

The current validation rules be revisited and corrected to allow securities lending participants to report fields 2.75 and 2.96 accurately when the true conditions are met and thereby reflect activity correctly.

Pending any review, the proposed best practice3 is presented in below logical approach: (SFTR-811)