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LEIs for SFTR - Securities Financing Transactions Regulation

Legal Entity Identifier (LEI) - Securities Financing Transactions Regulation (SFTR)

Overview of the SFTR

sftr
Securities Financing Transactions Regulation (SFTR) is a regulation that was introduced in 2016 in order to improve the transparency and standardised processes for issuers and buyers in the securities markets in Europe. It is a phased approach and is regularly updated. 

The global securities and OTC markets have been subject to a litany of new regulations since the global financial crisis in 2008. One of the common requirements contained within these regulations is the requirement for a legal entity identifier.
Examples of these regulations are:
  • European Markets Infrastructure Regulation (EMIR) 
  • Markets in Financial Instruments Directive II (MiFID II)
  • Securities Financing Transactions Regulation (SFTR)
  • Central Securities Depositories Regulation (CSDR)​
  • Shareholder Rights Directive II (SRD II)
When it became apparent that there was a greater need for transparency in securities transactions, such as stock, liquidity or collateral swaps/re-use. SFTs which fall under the SFTR regulation include:
  • Repurchasing agreements
  • Securities & commodity lending
  • Margin lending
  • Buy/sell backs
The SFTR requires both parties in any given transaction to report details concerning the transaction. These reports are submitted to a trade repository such as DTCC, UnaVista, or Regis-TR. This report usually includes details such as participant details, details of the collateral, payment methods etc.
The correct reporting of valid LEIs is a requirement for the compliance of an SFT report with the reporting obligation under SFTR. The correctness and completeness of an SFT report is verified by a registered or recognised TR.
​ - ESMA

In addition to SFTR, CSDR (Central Securities Depository Regulation) was introduced to regulate CSDs responsible for enabling the sale of securities and will be in force on the 13th July 2020.  

According to both CSDR and SFTR both counterparties and collateral issuers need a Legal Entity Identifier. Branches of each entity requiring an LEI will also need to have their own LEIs. SFTR reporting is usually delegated to a third party to complete on behalf of the reporting entity, this third party may apply for LEIs on behalf of their clients.

Why does SFTR require the use of Legal Entity Identifiers?

​The global LEI system is freely accessible, public database providing details of legal entities globally. Each market participant falling under SFTR is required to register to the LEI database so that they are easily verifiable and identifiable.
 
As the LEI is a standardized database, it is reliable and trustworthy. Each LEI in the system requires annual renewal meaning it is also kept up to date.
 
To date, according to FSB data as of mid 2019, there is a high level of LEI coverage within the EU, with nearly 90% of entities already having an LEI code. However, a challenge still remains where third country issuers are still to adopt the LEI as less than 30% are estimated to have an LEI. ESMA have let it be known that EU market participants are to make their third country issuers aware of the LEI requirements.
 
The SFTR regulations came into place on the 20th April 2020 for EU parties and counterparties. This is extended to 13th April 2021 for non-EU (third country) issuers.

LEI Reporting Deadlines

Deadline
Entities which fall under the rule
LEI Requirement
13 April, 2020 (extendted to July due to COVID19)
SFTR parties;
Investments firms, creditors etc
Yes
13 July, 2020
Central Security Depositories
Yes
13 October, 2020
Funds, Insurance companies, pension funds
Yes
13th April, 2021
SFTR; Third country issuers
Yes

​LEI Worldwide provide a registration portal through which you can quickly, and easily register LEIs for EU entities. The LEI application process takes less than 10 minutes and for EU countries the LEI issuance timeframe is between a few minutes to an hour.
 
In order to prevent your LEI from lapsing, select auto-renewals at checkout.
 
If you have any questions or would like to find out more about LEIs and SFTR requirements please contact support at [email protected]

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​Facilitating the global allocation of LEI numbers.

​​LEI Worldwide facilitate entity identification in the global financial system, capital markets and private sector. We make the process accessible and simple for Legal Entities to obtain Legal Entity Identifier numbers. By doing this we help facilitate the global allocation of LEI numbers. It is our mission to be the one point of contact globally between Legal Entities & LOU’s and ensuring the LEI becomes the Worlds most important identifier.

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