As the deadline of 29 April 2024 approaches for Unique Product Identifier (UPI) reporting in the European Union, derivatives firms across the region are preparing to meet the new regulatory requirements. The Derivatives Service Bureau (DSB) has released the latest data on industry readiness, revealing the preparations underway.

EU Firms Prepare for UPI Reporting as Compliance Deadline Nears

After the United States implemented UPI reporting in January 2024, the EU will become the second G20 jurisdiction to adopt this reporting standard. The UK is expected to follow in September 2024.

"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,” said Emma Kalliomaki, the Managing Director of ANNA and the DSB, highlighting the importance of this milestone.

The UPI is a new, standardized taxonomy developed by global regulators that better describes the various attributes of OTC derivative products. It replaces simpler taxonomies like "FX Forward." UPIs enable aggregating OTC derivatives transaction data reported to trade repositories, allowing authorities to assess systemic risk.

The EU's UPI reporting will complement the existing ISIN for OTC derivative reporting, playing a crucial role in price transparency, market abuse detection under MiFIR, and aggregating OTC derivatives data under EMIR. The purposefully complementary design of the two identifiers ensures that UPI data attributes and the UPI code itself are included in the OTC ISIN record.

Industry Readiness on the Rise

According to DSB user onboarding data, European organizations are well-equipped to comply with their UPI regulatory requirements. The number of EU-based firms subscribing to the UPI Service has steadily increased, with 246 firms, including 122 programmatic users, now using the service across different fee-paying categories.

Banks constitute the largest entity group at 44%, while other participants, such as trade execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term platforms, clearinghouses, brokerages, trade repositories, and data management providers, have joined the service. About 33% of these organizations are based in the EU.

"We've collaborated with stakeholders to ensure the OTC ISIN design aligns and complements the UPI," Kalliomaki said. "As a result, the relationship between the two identifiers is being leveraged for the EU UPI implementation to ease integration and reduce the regulatory reporting burden on firms."

Firms Prepare for Reporting Obligations Using DSB Platform

As the UPI reporting deadlines are near, firms can prepare for their reporting duties using the DSB's scalable Client Onboarding and Support Platform. This platform allows for quick joining to the UPI Service, offering various effective connectivity Connectivity Connectivity is defined as a term used for connecting devices to each other. In most cases, this refers to computer networking and more specifically includes bridges, routers, switches, gateways, and service as well as local networks. Connectivity can refer to simple forms, such as connecting a home or office to the internet or even connecting a digital camera to a computer or printer. Connectivity in FinanceConnectivity has taken on new meaning with the growth of fintech and Big Data collectio Connectivity is defined as a term used for connecting devices to each other. In most cases, this refers to computer networking and more specifically includes bridges, routers, switches, gateways, and service as well as local networks. Connectivity can refer to simple forms, such as connecting a home or office to the internet or even connecting a digital camera to a computer or printer. Connectivity in FinanceConnectivity has taken on new meaning with the growth of fintech and Big Data collectio Read this Term and service options for easy access to UPIs across all products.

The UPI Service, which went live in October 2023, is the product of ongoing collaborative efforts among industry stakeholders, global regulatory bodies, and the DSB. Since its launch, over 1 million UPIs have been created for users and sorted by asset class.

In the near future, the UK will start UPI reporting in September, followed by Australia and Singapore in October 2024 and Japan in April 2025. Furthermore, Hong Kong authorities, HKMA and SFC, are currently discussing the OTC derivatives reporting regime, with a proposal for mandatory UPI reporting starting in September 2025.