CFTC Phase 2 Countdown: Part 2 – The Move to a UPI Model

As we shared in our previous post, the CFTC and other regulatory regimes are revising their trade reporting rules in the name of global data harmonization and standardization, by developing common data standards for reporting various transactions, including the standardization of OTC derivative products using a Unique Product Identifier (UPI).

  • The concept of a Unique Product Identifier (UPI) has evolved over the last few years and is the most critical data element of the latest rounds of trade reporting ‘Refits’ and ‘Rewrites’. 
  • One of the key motivations behind the UPI is to uniquely identify OTC derivative products, as defined by a specific set of reference data elements, for the purpose of regulatory reporting to trade repositories and other pre and post trade processes.  
  • G20 Global regulators have nominated The International Organization for Standardization (ISO), which has developed  the UPI standard, format, and computation of the UPI code, which can be found here:  ISO 4914:2021 — Unique product identifier (UPI).  
  • “UPI Service Providers” will implement this standard: ISO 4914:2021(E) to create new or edit existing UPI codes, as well as maintain the required UPI Reference Data Library, which houses the description and key data elements that together describe a given UPI code generated and assigned to a distinct OTC derivatives product. 
  • The CFTC will be the first regulator to adopt this product classification system, resulting in standardized identification of OTC products that have and will continue to exist as customized and tailored to each counterparties contract needs.  This UPI logic aims to have firms report using one standard that is global in scale, adheres to international technical standards, and is jurisdiction agnostic (which significantly reduces operational and compliance costs for those firms that have reporting obligations under multiple jurisdictions). 

Essentia is proud to support our clients through regulatory changes and updates.  For questions on the implications of CFTC Phase 2 on your organization, please contact us to reach out about how Essentia can help.

Rahim Kabani, Director, Essentia Advisory Partners
Rahim Kabani is a director at Essentia Advisory Partners where he heads our Regulatory Compliance Advisory service. He has over 15 years of derivatives trading & regulatory compliance experience spanning multiple jurisdictions. Email: rahim_kabani@epam.com

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