Finastra Launches Securities Financing Transaction Regulation Support

Finastra has launched securities financing transaction regulation (SFTR) support ahead of the European Union’s April 11, 2020 deadline.

Securities financing transactions (SFTs) are transactions where securities are used to borrow cash or cash is used to repay borrowed securities. These transactions are essentially loans to parties who are selling short (selling a share they borrowed from someone else because they believe the shares are going to decline in value). When the shares are repurchased, hopefully at a lower price than they were sold at, the transaction is said to have been “covered” or repaid.

Because these transactions essentially involve a loan, there’s risk involved. In cases where the transaction is a short sale (shares sold by a party who doesn’t own the shares), there is theoretically infinite exposure. While a loan to buy shares has quantifiable risk, since shares can only drop to zero, a short sale has technically unlimited risk. Software such as Finastra is a key risk mitigation feature for the bank.

Finastra Retail Banking at Software Reviews, Accessed November 28, 2019

Our Take

Surveillance and reporting requirements within the banking industry continue to escalate, largely in response to increased focus on global money laundering activity. Finastra’s SFTR support is a cloud-based addition to its existing regulatory reporting software. It collects and checks information used in securities financing transactions.