The Derivatives Service Bureau (DSB) has taken three more significant steps towards go live of the Unique Product Identifier (UPI) service in July 2022 with the publication of a draft implementation timeline, an initial list of products that will require UPIs and a second UPI fee model industry consultation focusing on the timeline and encouraging industry to share its views on UPI services and costs.
The UPI is designed to facilitate effective aggregation of OTC derivatives transaction reports on a global basis and will be used in all jurisdictions where OTC derivatives are reported to trade repositories.
The timeline has been published on the UPI section of the DSB website and sets out when both draft and final documentation will be made available to support industry implementation of the UPI, as well as information on when the final product documentation, templates, and rules of engagement for programmatic users will be published.
The initial list of products that will carry the identifiers, and for which the DSB already generates ISINs and CFI codes, includes rates, credit, equity, foreign exchange, commodities and multi-asset products. The DSB is also discussing other products that may require UPIs, such as exotic products, that are not currently supported by the OTC ISIN service.
A second UPI fee model industry consultation opened on 10 May 2021 and will close on 9 July 2021, before publication of a final report on 27 September 2021.
Emma Kalliomaki, managing director of ANNA and the DSB, says: “We are running the second UPI consultation in parallel with the RFI process to identify a reference data provider for provision of underlier identifiers for the UPI. We are working hard to ensure that best practice and good governance principles are enshrined in the UPI service, so that both industry and regulators will have the most efficient UPI from July 2022.”
A key principle of the UPI is to align it with the ISIN and CFI. Although each identifier serves a different regulatory purpose, the alignment will allow firms to generate each identifier on a standalone basis or automatically ingest a record containing whichever identifiers are needed. Malavika Solanki, a member of the DSB management team, says: “We have done the mapping for you to simplify processes and improve regulatory reporting.”
The UPI will also work in tandem with critical data elements, the former identifying a product transaction and the latter details of the transaction. Solanki says: “The focus now is on clearly defining data elements that are replicable worldwide.”
She explains: “This is a global story. Whether jurisdictions are ready to go or are still in consultation, the aim of the UPI is to harmonise how data is reported to trade repositories and how regulators can use it to monitor risk and market abuse. The UPI will be a consistent identifier across many jurisdictions. It will start to provide consistent data and give regulators a consistent view of what is happening in systems and how they compare.”
Market participants that must report UPIs are also beginning to look at the potential of the identifier longer term, and are discussing how the UPI could be integrated in both regulatory reporting and business processes.