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Securities Financing Transactions (SFTs)

SFTs allow market participants to access secured funding, i.e. to use their assets to finance themselves. This involves the temporary exchange of assets as a guarantee for a funding transaction. Examples of SFTs are lending or borrowing of securities, repurchase or reverse repurchase transactions, buy-sell back or sell-buy back transactions, or margin lending transactions.

SFTs allow market participants to access secured funding and are an essential funding tool in the European Union. They allow financial intermediaries to make markets and facilitate the implementation of various investment and risk management strategies. They are also an integral part of the monetary policy operations of European central banks.

European rules enhancing transparency of SFTs (SFTR)

On 16 November 2015, the SFTR was adopted by Council of the European Union.

On 29 October 2015, SFTR was adopted by the European Parliament.

On 29 June 2015, the Permanent Representatives Committee endorsed, on behalf of the Council of the European Union, the agreement with the Parliament.

On 17 June 2015, the European Parliament and the Council reached an important agreement on a Regulation on transparency of SFTs and of reuse, also known as (“SFTR”). For more information see press release of 17.06.2015.

Proposal on transparency of securities financing transactions - 29.01.2014

On 29 January 2014, the European Commission adopted a proposal for a Regulation aimed at increasing transparency of SFTs and of reuse.

This proposal provides a set of measures aiming to enhance regulators’ and investors’ understanding of securities financing transactions (STFs). During the financial crisis, regulators and supervisors encountered difficulties in anticipating the emergence of risks in the area of securities financing. This was mainly due to the lack of timely and comprehensive data. Both internationally (e.g. FSBpdf) and in the European Union (e.g. Commission’s Communication on Shadow Banking), it was widely agreed that transparency needs to be enhanced.

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