As the
deadline of 29 April 2024 approaches for Unique Product Identifier (UPI)
reporting in the European Union, derivatives firms across the region are
preparing to meet the new regulatory requirements. The Derivatives Service
Bureau (DSB) has released the latest data on industry readiness, revealing the
preparations underway.
After the
United States implemented UPI reporting in January 2024, the EU will become the
second G20 jurisdiction to adopt this reporting standard. The UK is expected to
follow in September 2024.
“This
second UPI compliance milestone highlights the momentum of G20 jurisdictions in
fulfilling commitments made after the financial crisis. It contributes to the
ongoing efforts to enhance global systemic risk monitoring by aggregating OTC derivatives data,” said Emma Kalliomaki, the Managing Director
of ANNA and the DSB, highlighting the importance of this milestone.
The UPI is
a new, standardized taxonomy developed by global regulators that better describes the various attributes of OTC derivative products. It replaces simpler
taxonomies like “FX Forward.” UPIs
enable aggregating OTC derivatives transaction data reported to trade
repositories, allowing authorities to assess systemic risk.
The EU’s
UPI reporting will complement the existing ISIN for OTC derivative reporting,
playing a crucial role in price transparency, market abuse detection under
MiFIR, and aggregating OTC derivatives data under EMIR. The purposefully
complementary design of the two identifiers ensures that UPI data attributes
and the UPI code itself are included in the OTC ISIN record.
Industry Readiness on the
Rise
According
to DSB user onboarding data, European organizations are well-equipped to comply
with their UPI regulatory requirements. The number of EU-based firms
subscribing to the UPI Service has steadily increased, with 246 firms,
including 122 programmatic users, now using the service across different
fee-paying categories.
Banks
constitute the largest entity group at 44%, while other participants, such as
trade execution platforms, clearinghouses, brokerages, trade repositories, and
data management providers, have joined the service. About 33% of these
organizations are based in the EU.
“We’ve
collaborated with stakeholders to ensure the OTC ISIN design aligns and
complements the UPI,” Kalliomaki said. “As a result, the relationship
between the two identifiers is being leveraged for the EU UPI implementation to
ease integration and reduce the regulatory reporting burden on firms.”
Firms Prepare for
Reporting Obligations Using DSB Platform
As the UPI
reporting deadlines are near, firms can prepare for their reporting duties using
the DSB’s scalable Client Onboarding and Support Platform. This platform allows
for quick joining to the UPI Service, offering various effective connectivity
and service options for easy access to UPIs across all products.
The UPI
Service, which went live in October 2023, is the product of ongoing
collaborative efforts among industry stakeholders, global regulatory bodies,
and the DSB. Since its launch, over 1 million UPIs have been created for users and sorted by asset class.
In the near
future, the UK will start UPI reporting in September, followed by Australia and Singapore in October 2024 and Japan in April 2025. Furthermore, Hong Kong authorities, HKMA and SFC, are currently discussing the OTC derivatives reporting regime, with a proposal for mandatory UPI reporting starting in September 2025.
As the
deadline of 29 April 2024 approaches for Unique Product Identifier (UPI)
reporting in the European Union, derivatives firms across the region are
preparing to meet the new regulatory requirements. The Derivatives Service
Bureau (DSB) has released the latest data on industry readiness, revealing the
preparations underway.
After the
United States implemented UPI reporting in January 2024, the EU will become the
second G20 jurisdiction to adopt this reporting standard. The UK is expected to
follow in September 2024.
“This
second UPI compliance milestone highlights the momentum of G20 jurisdictions in
fulfilling commitments made after the financial crisis. It contributes to the
ongoing efforts to enhance global systemic risk monitoring by aggregating OTC derivatives data,” said Emma Kalliomaki, the Managing Director
of ANNA and the DSB, highlighting the importance of this milestone.
The UPI is
a new, standardized taxonomy developed by global regulators that better describes the various attributes of OTC derivative products. It replaces simpler
taxonomies like “FX Forward.” UPIs
enable aggregating OTC derivatives transaction data reported to trade
repositories, allowing authorities to assess systemic risk.
The EU’s
UPI reporting will complement the existing ISIN for OTC derivative reporting,
playing a crucial role in price transparency, market abuse detection under
MiFIR, and aggregating OTC derivatives data under EMIR. The purposefully
complementary design of the two identifiers ensures that UPI data attributes
and the UPI code itself are included in the OTC ISIN record.
Industry Readiness on the
Rise
According
to DSB user onboarding data, European organizations are well-equipped to comply
with their UPI regulatory requirements. The number of EU-based firms
subscribing to the UPI Service has steadily increased, with 246 firms,
including 122 programmatic users, now using the service across different
fee-paying categories.
Banks
constitute the largest entity group at 44%, while other participants, such as
trade execution platforms, clearinghouses, brokerages, trade repositories, and
data management providers, have joined the service. About 33% of these
organizations are based in the EU.
“We’ve
collaborated with stakeholders to ensure the OTC ISIN design aligns and
complements the UPI,” Kalliomaki said. “As a result, the relationship
between the two identifiers is being leveraged for the EU UPI implementation to
ease integration and reduce the regulatory reporting burden on firms.”
Firms Prepare for
Reporting Obligations Using DSB Platform
As the UPI
reporting deadlines are near, firms can prepare for their reporting duties using
the DSB’s scalable Client Onboarding and Support Platform. This platform allows
for quick joining to the UPI Service, offering various effective connectivity
and service options for easy access to UPIs across all products.
The UPI
Service, which went live in October 2023, is the product of ongoing
collaborative efforts among industry stakeholders, global regulatory bodies,
and the DSB. Since its launch, over 1 million UPIs have been created for users and sorted by asset class.
In the near
future, the UK will start UPI reporting in September, followed by Australia and Singapore in October 2024 and Japan in April 2025. Furthermore, Hong Kong authorities, HKMA and SFC, are currently discussing the OTC derivatives reporting regime, with a proposal for mandatory UPI reporting starting in September 2025.
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- Source: https://www.financemagnates.com//institutional-forex/eu-embraces-derivatives-reporting-firms-prepare-for-april-2024-deadline/
