Governance arrangements for the UPI
This report sets out governance arrangements for the globally harmonised Unique Product Identifier (UPI).
G20 Leaders agreed at the Pittsburgh Summit in 2009, as part of a package of reforms to the over-the-counter (OTC) derivatives markets, that all OTC derivatives transactions should be reported to trade repositories. 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 UPI will uniquely identify the product involved in OTC derivatives transactions reported to trade repositories. This will help authorities to aggregate data on OTC derivatives transactions by product. Such aggregation will facilitate the effective use of OTC trade reporting data, including helping authorities assess systemic risk and detect market abuse. It will therefore deliver one of the key objectives of the G20 reforms to OTC derivatives markets.
The final report of the FSB’s Feasibility study on approaches to aggregate OTC derivatives data published in September 2014 recommended a number of key preparatory steps that should be undertaken to enable effective global aggregation of OTC derivatives trade reporting data. One of these preparatory steps is harmonisation of important data elements reported to trade respositories, including the creation of a UPI and Unique Transaction Identifier (UTI) and the global introduction of a legal entity identifier (LEI).
The Legal Entity Identifier Regulatory Oversight Committee (LEI ROC) is best positioned to become the International Governance Body for the UPI and UTI and critical other elements (CDE) other than UTI and UPI. The FSB takes this decision in coordination with the Committee on Payments and Market Infrastructures (CPMI) and International Organization of Securities Commissions (IOSCO), which were tasked to develop governance arrangements for the CDE. In the interim, the FSB will take on the functions that have been allocated to the International Governance Body.
The FSB also recommends that jurisdictions undertake necessary actions to implement the UPI Technical Guidance and that these take effect no later than the third quarter of 2022.