The Financial Stability Board (FSB) has published a consultation document on proposed Governance arrangements for the unique product identifier (UPI). The consultation sets out proposals for the governance arrangements for a global UPI, as a key harmonised identifier designed to facilitate effective aggregation of transaction reports about over-the-counter (OTC) derivatives markets.
G20 Leaders agreed at the Pittsburgh Summit in 2009, as part of a package of reforms to the OTC derivatives markets, that all an OTC derivatives transaction should be reported to trade repositories (TRs).1 A lack of transparency in these markets was one of the key problems identified by the financial crisis. Trade reporting, by providing authorities with data on trading activity, is a key part of efforts to identify and address financial stability risks from these markets.
The primary purpose of the UPI is to identify the product that is the subject of OTC derivatives transactions. A UPI would be assigned to each product enabling regulators to aggregate data on OTC transactions by product using either the UPI or individual underlying data elements that make up the UPI. To use the data from trade reporting effectively, it is important for authorities to be able to aggregate reporting not only to consider institution-specific risks but also to consider system-wide risks.
The consultation complements the work of the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) as they develop guidance on harmonisation of data elements that are reported to TRs. CPMI and IOSCO published on 28 September their finalised technical guidance on the UPI. Under the Technical Guidance, a unique UPI code would be assigned to each distinct OTC derivative product and each UPI code would map to a set of data comprised of reference data elements with specific values that together describe the product.
This FSB consultation document identifies key criteria and functions for the UPI governance arrangements for consultation and also seeks specific feedback on certain issues relating to UPI service provider(s), cost recovery and fee models, and the reference data library that will underlie the UPI system. The FSB expects to publish a further consultation in early 2018 on proposals for the allocation of the UPI governance functions to various entities and further aspects of the UPI service provider model. It is envisaged that one or more UPI service providers will be selected during 2018.
The FSB ha said that it welcomes comments and responses to the questions set out in the consultation by Monday 13 November 2017. Responses should be sent to [email protected] with “UPI governance” in the e-mail subject line. Responses will be published on the FSB website unless respondents expressly request otherwise.
The FSB will hold a consultative roundtable on UPI governance on Wednesday 11 October 2017 in Montreal. Inquiries about attending the roundtable can be made to the e-mail address indicated above.