AutoRek's Consulting head on how tech can help overcome SFTR

17 January 2019 3 min. read

In the first quarter of 2020, Europe’s Securities Financing Transaction Regulation (SFTR) will come into effect. Marc McCarthy, Associate Director of Business Consulting at regulatory technology provider AutoRek, encourages financial services firms to look towards technology to help them smoothen SFTR implementation and monitoring.

“We have got a lot of clients who do transactional reporting across the whole G20, and yet following EMIR and MiFID II they’re seeing yet another piece of regulation coming out that they need to adhere to," commented McCarthy. "It’s quite time-intensive to get these regulations in place, and 2019 will therefore very much be about trying to find a better way to overcoming SFTR without too much hindrance to their businesses.” 

McCarthy added that there is a degree of fatigue at this point, with technology earmarked as the key to facilitating an effective transition. “In the coming period, companies will really look towards technology to fix regulatory challenges without them having to do too much.” 

The Securities Financing Transaction Regulation (SFTR) was introduced by the European Union to increase the transparency in the securities financing markets. SFTR will result in all EU firms being obligated to report their securities finance transactions (SFTs) to an approved trade repository. This will include securities lending activities, margin financing activities and repurchase agreements (repos). The new legislation is currently scheduled to go live in Q1 of 2020.

“In 2019, companies will really look towards technology as a better way to overcoming SFTR without too much hindrance to their businesses.”
– McCarthy, Associate Director of Business Consulting

Marc McCarthy went on to say that though there has been an increase in regulation over the past few years, he believes it to be a good thing that is “very much putting the customer at the forefront of corporate thinking today”, however he expects audits to be put in place surrounding the technology that he encourages firms to use. “I think 2019 will see audits of the technology that’s been put in place, of the procedures that have been put in place. I think that’s been a bit lacking in 2018. We expected it to happen; it didn’t come about, particularly not in the MiFID II space. And I think that’s largely due to Brexit and all the work that’s gone into that by the various staff of the FCA.” 

The role of technology has become a game changer for regulation and compliance. With the introduction of so many new regulations in the past few years, McCarthy believes each of them has spawned a new industry for Fintech and Regtech, with firms being pushed to consider these regulations whilst still relying on outdated practises and technologies to complete complex tasks. “Automation and proper regulatory technology offer accuracy, governance and control around important data.”

“Look at challenger banks for example, or the new fund platforms that are out there. They start on the premise of technology. They start very much with that in mind, with that being their end goal already from day one. And I think some of the older firms just need to catch up.” 

The Director of Business Consulting at AutoRek further pointed at the opportunities that will arise from emerging technologies such as artificial intelligence. “AI will help firms identify key customers, tailor solutions to them and ensure that alignment and personalisation is optimised. Robotics will play a huge part in ensuring that data is correct and is not misaligned. We see an awful lot of that…. These sort of technologies will definitely assist companies to be more accurate and better going forward.” 

Related: RegTech as a driver for regulatory and compliance cost reduction.