This consultation document sets out proposed governance arrangements for a global unique product identifier (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 OTC derivatives transactions 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 an OTC derivatives transaction. 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 trade repositories. CPMI and IOSCO published their finalised technical guidance on the UPI in September 2017.

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.

The consultation 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 welcomes comments and responses to the questions set out in the consultation by Friday 17 November 2017. Responses should be sent to fsb@fsb.org 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.

 

  1. The five reforms are: trade reporting of OTC derivatives; central clearing of standardised OTC derivatives; exchange or electronic platform trading, where appropriate, of standardised OTC derivatives; higher capital requirements for non-centrally cleared derivatives; and initial and variation margin requirements for non-centrally cleared derivatives. []