EMIR Refit will see the introduction of a new field – the Unique Product Identifier (UPI). The UPI is being added to EMIR, as well as other regimes such as ASIC, MAS and CFTC derivative reporting so as to more closely align regulation worldwide.
Prior to EMIR’s inception, there had not been a universal system of identifying financial instruments. Thus, EMIR reporting often has included a mix of CFI codes and ISINs, interpretation of which can be confusing for investment firms as to what exactly is required.
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CFI codes are often presented incorrectly, and don’t correspond to the same data reported elsewhere in the same report (such as delivery type). Populating solely the first two characters out of six, leaving the remaining characters as XXXX (for example JRXXXX) is an all-too-common reporting error. Under EMIR, the entire CFI code needs populating for accurate reporting.
Conceptually, UPIs can be considered to sit between CFI codes and ISINs, both of which are currently EMIR reportable fields. The UPI will work in conjunction with Unique Transaction Identifiers (UTIs) and Critical Data Elements (CDE) which are also expected to be reportable to global regulatory authorities. In the first instance, UPIs are designed to uniquely identify financial instruments involved in OTC derivative transactions to be reported to a trade repository (TR).
The Official Journal of the European Union has published the requirement for the UPI, created and distributed by the Derivatives Service Bureau (ANNA DSB). The mandate is included within EMIR Refit and makes the EU the first jurisdiction among the G20 to enforce use of the UPI alongside the existing Legal Entity Identifier (LEI). The LEI identifies the parties to a derivative trade, whilst the UPI identifies what derivative product was traded.
The introduction of the UPI under the ANNA DSB is a welcome improvement. One centralised place for UPIs will reduce inconsistency and will hopefully reduce the volume of reportable fields in the future, as many separate data elements can be obtained from the UPI.
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Once introduced, firms will need to apply for UPIs or use existing UPIs with the same characteristics created by another ANNA DSB user. They will also need to ensure that they have enough time for a UPI to be allocated and still adhere to the T+1 reporting requirements. This is therefore likely to require a fair degree of prior planning, particularly when new derivatives are introduced. ANNA DSB initially had planned to go live with the UPI service in July 2022, but this has since been delayed. A new start date of 29 January 2024 for the UPI service is planned, following the publication of a CFTC designation order confirming the UPI will be required in recordkeeping and swap data reporting in the US.