Governance of OTC Derivatives Data Elements Finalised

The FSB has now published the final governance arrangements for both the UTI and UPI, while CPMI-IOSCO has published the same for the other critical data elements.

The international standard-setting bodies have published the final governance arrangements for key OTC derivatives data elements, and have recommended jurisdictions implement them within three years.

The FSB (Financial Stability Board) has published a report on the governance arrangements for the UPI (Unique Product Identifier), which will uniquely identify the product involved in OTC derivatives transactions reported to trade repositories.

The UPI will help authorities to aggregate transaction data by product, facilitating the effective use of OTC derivatives trade reporting data by authorities to assess systemic risk and detect market abuse, and thereby delivering on a key G20 reform objective.

The FSB is in charge of defining the governance arrangements for both the UPI and UTI (Unique Transaction Identifier). The governance arrangements for the UTI were published in December 2017.

> ALSO READ: FSB Designates UK Agency as Sole UPI Service Provider (3 May 2019)

CPMI (Committee on Payments and Market Infrastructures) and IOSCO (International Organization of Securities Commissions) have likewise published a report which identifies key criteria, functions and bodies for the governance arrangements for CDEs (critical data elements) other than the UTI and UPI.

“The move aims to improve transparency, mitigate systemic risk and prevent market abuse. Aggregating the data reported across trade repositories will help ensure that authorities have a comprehensive overview of the OTC derivatives market and its activity,” CPMI-IOSCO said.

The FSB, CPMI and IOSCO have concluded that the LEI ROC (Regulatory Oversight Committee of the Legal Entity Identifier) is best positioned to become the International Governance Body for the UPI, the UTI and other CDEs – by mid-2020.

The LEI ROC will first have to make appropriate adjustments to its existing governance to make it fit for purpose. In the interim, the FSB will perform the functions of the International Governance Body.

The FSB, CPMI and IOSCO also recommend that jurisdictions take steps to implement the governance arrangements by the third quarter of 2022.

The governance arrangements were designed to complement the Technical guidance on harmonisation of the UTI, the Technical guidance on harmonisation of the UPI and the Technical guidance on harmonisation of critical OTC derivatives data elements (other than UTI and UPI).

These serve as global guidance – developed by CPMI-IOSCO – regarding the definition, format and allowable values of critical OTC derivatives data elements that may be reported to trade repositories.

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