This consultation document sets out proposals for the governance arrangements for the unique transaction identifier (UTI), as a key harmonised identifier designed to facilitate effective aggregation of transaction reports about over-the-counter (OTC) derivatives markets. The FSB recommended the creation of the UTI in its 2014 publication Feasibility study on approaches to aggregate OTC derivatives data.
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). A lack of transparency in these markets was one of the key problems highlighted by the financial crisis of 2007-08. Trade reporting, by providing authorities with access to data on trading activity, trade reporting is a key part of efforts to increase transparency and identify and mitigate financial stability risks from these markets. To use the data from trade reporting effectively, it is important for authorities not only to be able to consider institution-specific risks but to be able to aggregate reporting to consider system-wide risks.
The primary purpose of the UTI is to uniquely identify individual financial transactions in reports to Trade Repositories (TRs). In particular, a UTI helps to ensure the consistent aggregation of OTC derivatives transactions by minimising the likelihood that the same transaction will be counted more than once (for instance, because it is reported by more than one counterparty to a transaction, or to more than one TR).
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 global guidance on harmonisation of data elements that are reported to TRs. On 28 February CPMI and IOSCO issued Technical Guidance: Harmonisation of the Unique Transaction Identifier (UTI Technical Guidance), setting out the UTI Data Standard, which contains a structural definition and a format specification. The UTI Technical Guidance also addresses associated matters such as the circumstances in which a UTI should be used, who should be responsible for generating a UTI and the impact of lifecycle events on the UTI.
The consultation document identifies key criteria for the UTI governance arrangements and the rationale for a number of those criteria; identifies UTI governance functions to be performed, including a mapping of those functions into three broad areas of governance; proposes the allocation of some functions to specific bodies; and identifies options for the allocation of some other functions. In order to maximise the benefits and minimise the costs associated with UTI, the FSB proposes the governance arrangements should avoid unnecessary complexity and take due account of existing resources and arrangements.
The FSB welcomes comments and responses to the questions set out in the consultation by Friday, 5 May 2017. Responses should be sent to [email protected] with “UTI governance comment” in the e-mail subject line. Responses will be published on the FSB website unless respondents expressly request otherwise.
The FSB intends to have a stakeholder roundtable on UTI governance on 25 April 2017 in Amsterdam. Inquiries about attending the roundtable can be made to the e-mail address indicated above.