Both ESMA and the FCA are placing greater emphasis on Unique Transaction Identifiers (UTI) and their consistent application between counterparties. In an effort to align the UK and EU reporting frameworks with global standards, regulators have introduced the UTI generation waterfall developed by CPMI-IOSCO into both EU and UK EMIR Refit 2024. This aims to foster data harmonisation and ensure a more globally consistent dataset.
What is the Unique Transaction Identifier?
The primary purpose of the UTI is to uniquely identify individual transactions which are reported to a Trade Repository (TR). They are also used to pair each unique transaction between the trading parties. Every reportable transaction must have a UTI so there is no instance where the transactions are duplicated. The UTI should not be reused, even if the previous transaction is no longer open. An individual transaction should maintain its UTI throughout its lifecycle, including any amendments or updates made to the transaction.
UTIs should consist solely of alphanumeric characters and be composed of a combination of the LEI of the generating entity and a unique code created by that entity. As with the current EMIR regulation, the total number of characters allowed remains 52 characters.
Who is responsible for generating the UTI?
Article 7 of EMIR REFIT’s ITS and Article 8(4) of UK EMIR Technical Standards requires the counterparty generating the UTI share it with the other counterparty no later than 10:00 am UTC of the next working day. In case the generating party fails to provide it in due time, the receiving party should contact the generating party and enquire about the process instead of reporting its own UTI. At this stage it remains unclear how plausible it is for entities located in different regions to provide the UTI in a timely manner and how the regulators will approach this.
Firms with sizeable trades will most likely implement a ‘bilateral agreement’ with their counterparties to generate the same UTI based on an agreed methodology. It is also possible for a third party like a liquidity aggregator or a confirmation platform provider to generate the UTI for both parties.
For example, when a client places a trade with an investment firm on a trading platform, that trade will pass through the liquidity aggregator’s bridge and get executed with a Liquidity Provider (LP). This provides the investment firm and the LP access to all trade details including the UTI created by the liquidity aggregator.
Example: UTI = LEI of the Liquidity Provider + Trade ID from Liquidity Aggregator
Cleared transactions should have the UTI generated by the Central Clearing Counterparty (CCP) at the point of clearing. If the transaction is centrally executed by a trading venue, the trading venue is responsible for generating the UTI.
The solution of last resort to determine the entity generating the UTI is to sort the LEIs in reversed order using the ASCII sorting method, where a digit always precedes a letter.
The flowchart below (Section 4.11 Final Report EU EMIR Refit) illustrates how counterparties should determine the entity responsible to generate the UTI.
For investment firms trading with jurisdictions outside of the EMIR regime, some counterparties will be subject to regimes which have not yet or are unlikely to implement the global UTI. In such cases, there will be no need to obtain any bilateral agreement or meet the waterfall flowchart above.
How TRAction can help?
It greatly helps if both counterparties use the same delegated reporting provider, such as TRAction, to process and submit EMIR trade reports on their behalf. This way neither counterparty will have to worry about inconsistencies in methodology or interpretation as TRAction can ensure the UTI and other fields are reported in a consistent manner.