ASIC’s Transaction Reporting Rules (ASIC Rules) do not impose any obligation for matching or pairing trade reports between counterparties. Neither the ASIC Rules nor Regulatory Guide 251 (RG 251), require that the data reported by one counterparty matches or pairs with the data reported by the other counterparty (whereas there is a matching regime under EMIR Refit).
The closest mechanism to pairing under the ASIC Rules is the Unique Transaction Identifier (UTI) Waterfall under Rule 2.2.9. This is a mechanism through which both sides of a trade are expected to use the same identifier. RG 251 states that the UTI provides significant regulatory benefit in terms of matching both sides of the same transaction, including avoiding double counting in market metrics such as turnover and aggregate notional principal. To support this outcome, Rule 2.2.9 generally requires a reporting entity to generate a UTI and provide it to the other counterparty as soon as practicable. Section D of RG 251 provides guidance on the generation, receipt from, and provision to another entity of a UTI to be used in reporting.
While this promotes consistency, it remains an indirect consequence of each party’s individual compliance obligations, not a mandatory bilateral matching rule with consequences for mismatches per se.
No obligation to report the same UPI as your counterparty
Do you need to report the same unique product identifier (UPI) as your counterparty, under the ASIC Rules? No, you don’t.
The ASIC Technical Guidance confirms that reporting entities do not have to make sure that they report the same UPI that their counterparty has reported. ASIC makes suggestions as to reporting entities’ behaviours in the use of UPIs, encouraging adoption of common market practices so UPIs are used consistently and made clear at the outset of trading. These include (ASIC Technical Guidance – paragraph 99):
- using UPIs assigned to a trade through market infrastructure such as confirmation platforms and central counterparty clearing houses;
- specifying the UPI in trade confirmations; and
- implementing commonly accepted market practices around UPI communication among trading counterparts.
Individual data accuracy obligation
More broadly, the ASIC Rewrite reinforces that each reporting entity carries its own obligation of accuracy. Under RG 251, firms reporting OTC derivatives must take all reasonable steps to ensure the completeness, accuracy and currency of the information reported, pursuant to Rule 2.2.6. This obligation runs to each entity’s own report, it does not create a requirement to ensure alignment with the counterparty’s report.
That said, the ASIC Rewrite follows the IOSCO UTI Waterfall (albeit with some jurisdiction-specific nuances). As a result, it is reasonable to expect that ASIC and ADTRs will seek to reconcile reported trades and may engage with firms where transactions appear to be the same but are reported with different UTIs.
In CP 361, ASIC conducted a process of pairing UTIs and provided commentary:
“Reporting entities who already report paired UTIs are indicating that they have existing UTI transmission and receipt-handling capabilities. On a recent analysis, we identified 400 reporting entities who reported a paired UTI for some or all of their transactions.”
Although this statistic pre-dates ASIC Rewrite and therefore the numbers should now presumably be much higher, it is indicative of ASIC attributing value to it.
Other Regulators
Where there is dual-sided reporting, an inability to match reporting from both sides inevitably leads to a duplication of exposure in the market being reported to regulators. Unlike Australia, several jurisdictions have introduced formal matching requirements in response to the challenges of dual-sided reporting.
In Europe, this has resulted in the “matching” reports from the trade repositories. The fields which have to match under EMIR Refit are:
- UTI;
- UPI;
- Direction;
- ISIN;
- Venue of Execution; and
- The names of Counterparties 1 and 2 have to be mirrored.
This represents a more prescriptive approach to data reconciliation than currently adopted in Australia.. For now, the ASIC regime remains focused on individual reporting accuracy but global regulatory trends suggest that greater emphasis on data alignment may develop over time.
How can TRAction help?
If you are interested in learning more about pairing and matching, please reach out to our team at TRAction.
