The Derivatives Service Bureau (DSB) has had an interesting few years. Founded by the Association of National Numbering Agencies (ANNA) to facilitate the allocation and maintenance of International Securities Identification Numbers (ISINs), Classification of Financial Instrument codes (CFIs) and Financial Instrument Short Names (FISNs), in 2019 the group was also designated by the Financial Stability Board as the service provider and sole issuer for the upcoming Unique Product Identifier (UPI) system, used to identify OTC derivatives in transaction reporting data. The move has necessitated a pivot in focus for the agency, which will also function as the operator of the UPI reference data library and aggregate the effective use of trade reporting data.
“The regulators expect the UPI to be available in Q3 2022,” DSB Member of the Management Team Malavika Solanki tells Data Management Insight. “So there is a lot of focus on laying the groundwork for that, which we have been working on for some time along with our Product Committee and Technology Advisory Committee. There is also work ongoing to create a formal ISO standard for the UPI so that is commonly understood and can be reported by parties around the world.”
With effectively a two-year lead time, and the expectation of rigorous oversight from the FSB and other authorities, the pressure is on. “There are numerous pieces of work that need to be prepared, and then the industry will still need time to adapt and adopt ahead of the deadline, so this is a priority for us,” comments Solanki.
In order to effectively address these priorities, the DSB this month announced the expansion of its Technology Advisory Committee, a 27-member group established to provide technical support to the company, which meets in March and October for technology governance purposes, and more regularly in response to the wider and more urgent needs of the industry that arise through the DSB’s annual industry consultation process.
In addition to the OTC ISIN, the TAC is extending its remit from October this year to cover matters relating to the UPI, and as such is calling for up to 10 new members to join the committee – with applicants from Asia, the Middle East, Africa and South America particularly welcome, and with a focus on expertise in infrastructure and cloud-based technology, workflows and cybersecurity. The deadline for applications is September 4, 2020.
“The DSB’s call for additional technical expertise is partly designed to reflect the recent update of DSB TAC Charter which extends the TAC’s work to cover UPIs,” explains Emma Kalliomaki, Managing Director of ANNA and the DSB. “It will also help further expand the range of geographic perspectives that shape the work of the DSB.”
And there is more work to be done beyond the UPI remit. “The other piece of work that we will be looking at, and that will, I think, take up an increasing share of market mind share, is the CFI standard itself,” reveals Solanki. “There was an update to the standard in 2019, but the industry is currently using a 2015 version of the CFI standard, which now needs to be reviewed. So we will be updating the information the DSB provides to accommodate the 2019 standard, both in terms of workflows and specifically in terms of product definitions. This will involve a substantial transition, with the biggest differences lying on the OTC derivatives side, so this will be a major project.”
Other areas of focus for the DSB this year will be data enhancements and alignment, and cyber security. “We will spend 2020 doing analysis around these focus areas, and then presenting it back to the industry for feedback,” says Solanki. “Standardisation is becoming a key issue. A large part of the industry has started now to ingest the full OTC reference data record that they get through the DSB and then use that in their data structures, and in their own internal data models in different ways, sometimes to report to regulators, other times because they’re finding it helpful for their own processing needs. As a result of this year’s latest consultation, we’ve been asked to look at the way the FISN for OTC derivatives is constructed, and to see if we can enhance it further so that more people can rely on it in a systematic manner for non-regulatory purposes.”
The DSB was created for a specific purpose, but with standardised data increasingly available, that that adoption model is starting to evolve significantly – and as it does so, the firm itself is effectively pivoting to meet these new requirements.