As the April 29, 2024, deadline looms for the implementation of Unique Product Identifier (UPI) reporting in the European Union, the derivatives industry is making strides to comply with this new regulatory framework.
The Derivatives Service Bureau (DSB) has shed light on the industry’s readiness, indicating significant preparation efforts across the region.
Following the United States, which initiated UPI reporting in January 2024, the EU is set to be the next G20 jurisdiction to enforce this standard, with the UK scheduled to join in September 2024.
Emma Kalliomaki, Managing Director of ANNA and the DSB, emphasized the global momentum towards enhancing financial stability, stating, “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.”
The UPI system introduces a standardized approach to describing OTC derivative products, facilitating better aggregation of transaction data for systemic risk assessment.
This initiative is aimed at improving global financial oversight by providing a comprehensive view of the derivatives market, previously characterized by simpler classifications like “FX Forward.”
In the EU, UPI reporting is designed to complement existing ISIN codes used for OTC derivatives, aiding in market transparency and the detection of market abuse under MiFIR, as well as data aggregation under EMIR.
The integration of UPIs within the OTC ISIN record is intentionally crafted to streamline regulatory reporting processes.
European firms are gearing up for the transition, with the DSB reporting a surge in subscriptions to its UPI Service.
Currently, 246 firms, including 122 programmatic users, have embraced the service, spanning various fee categories.
Banks make up 44% of these entities, alongside other market participants including trade execution platforms and data management providers, with approximately a third based in the EU.
Kalliomaki highlighted the collaborative efforts to align the OTC ISIN with the UPI, stating, “We’ve collaborated with stakeholders to ensure the OTC ISIN design aligns and complements the UPI.”
This strategic coordination aims to simplify integration and lessen the reporting load for firms.
To facilitate compliance, the DSB offers a scalable Client Onboarding and Support Platform, making UPI access and reporting more manageable for firms across all products.
Since the service’s inception in October 2023, over 1 million UPIs have been issued.
Looking ahead, the UK, Australia, Singapore, and Japan are on the roadmap for implementing UPI reporting, with Hong Kong considering a mandatory regime starting in September 2025.
This global adoption underscores the commitment to bolstering financial system transparency and resilience through standardized reporting.