As Banks and financial firms integrate Unique Product Identifiers (UPIs) into their data systems, they must provide operations training regarding the new data field, and reinforce data management systems to handle the new UPIs, according to Kristin Kelly, Chief Product Officer, Derivative Path.
“We recognize the important role that UPIs play in streamlining data across platforms and jurisdictions, providing increased homogenization as it relates to the classification of complex derivatives products,” she said.
Kelly told Traders Magazine that notable UPI implementation challenges include integrating UPIs into existing infrastructures without disrupting ongoing reporting processes while maintaining data accuracy across systems.
The UPI is a new, standardized taxonomy from global regulators that aims to better describe attributes of OTC derivatives products, allowing authorities to assess systemic risk.
On April 29, the EU is set to become the second G20 jurisdiction to adopt the Unique Product Identifier (UPI) reporting framework.
The European Union follows the US, which went live on January 29, 2024.
The EU UPI reporting will be complementary to the existing ISIN for OTC derivative reporting, which is important to price transparency and market abuse detection under MiFIR, and for aggregating OTC derivatives data under EMIR.
Firms with a global presence face unique compliance challenges when jurisdictions adopt new data reporting requirements like UPIs, commented Kelly.
“By proactively adopting a standardized approach, companies can establish a consistent benchmark that might later be extended globally,” she said.
“This proactive strategy not only ensures compliance but also positions the firm as a leader in regulatory readiness,” she added.
Kelly said the adoption of UPIs will enhance swaps data reporting by making such data more useful and approachable, allowing firms to identify and manage their risk exposures more accurately.
“This increased detail not only aids firms in their internal risk management but also contributes to a more transparent market environment,” she said.
“Such transparency should provide for crucial and effective regulatory oversight and help maintain market integrity, which in turn should support better decision-making processes within firms,” she added.
Managing continuous regulatory change and the evolving demands of the capital markets can be challenging for banks and financial institutions.
“Partnering with knowledgeable providers is crucial to navigating these areas, which are expected to undergo significant regulatory developments,” Kelly stressed.
“Such proactive measures are key to ensuring compliance and maintaining competitive advantage,” she added.
The UPI Service was launched on October 16, 2023 as a result of ongoing collaborative efforts involving industry stakeholders, global regulatory bodies, and the Derivatives Service Bureau (DSB), which serves as the UPI Service Provider.
Since its launch, more than 1 million Unique Product Identifiers (UPIs) have been created and made accessible to users.
UPIs are categorised by asset class, with volumes regularly reported.
After the EU, the next jurisdiction to roll out UPI reporting will be the UK on September 30, 2024, followed by Australia and Singapore from October 21, 2024 and Japan from April 7 2025.
In addition, the Hong Kong authorities, HKMA and SFC, are consulting on the OTC derivatives reporting regime, proposing mandatory UPI reporting from 29 September 2025.
