Commodity Futures Trading Commission (CFTC) Alert! CFTC today issued an order to designate a unique product identifier and product classification system to be used in swap recordkeeping and reporting. More details inside.
- Federal Register (downloads pdf)
- Commissioner Christy Goldsmith Romero Statement
- Commissioner Caroline D. Pham Statement
Press release: https://www.cftc.gov/PressRoom/PressReleases/8659-23
The Commodity Futures Trading Commission today issued an order to designate a unique product identifier and product classification system to be used in swap recordkeeping and reporting.
The Commission has determined the unique product identifiers (UPIs) the Derivatives Service Bureau Limited (DSB) issues for swaps in the credit, equity, foreign exchange, and interest rate asset classes comply with the Commission’s requirements for a UPI and product classification system.
In the order, the Commission sets January 29, 2024 as the compliance date for registered entities and swap counterparties to use the DSB UPIs for swaps in the credit, equity, foreign exchange, and interest rate asset classes to comply with certain Commission swap recordkeeping and reporting requirements.
As detailed in the order, the Commission expects the use of UPIs will increase transparency in the swaps market, enabling the Commission to fulfill its regulatory responsibilities and assist in the real-time public reporting of swap transaction and pricing data.
“The order represents another important milestone in the Commission’s long running efforts to harmonize and standardize the swaps data elements required to be reported under the Commission’s regulations with those required to be reported by authorities in other jurisdictions,” said Vince McGonagle, Director of the Division of Market Oversight.
Commission staff will publish UPI-related modifications to Parts 43 and 45 Technical Specification in the near future on the Commission’s website here.
Summary of act published in federal register:
The Commodity Futures Trading Commission (“Commission”) has issued an Order to designate a unique product identifier and product classification system to be used in swap recordkeeping and data reporting. The Commission has determined that the unique product identifiers issued by the Derivatives Service Bureau Limited for swaps in the credit, equity, foreign exchange, and interest rate asset classes comply with the Commission’s requirements for a unique product identifier and product classification system, and have designated them as such. The Order requires registered entities and swap counterparties to use unique product identifiers issued by the Derivatives Service Bureau Limited for swaps in the credit, equity, foreign exchange, and interest rate asset classes to comply with certain of the Commission’s swap recordkeeping and reporting requirements.
Background
Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”)1 amended the Commodity Exchange Act (“CEA”)2 to establish a comprehensive regulatory framework for swaps. Amendments to the CEA included the addition of provisions requiring the retention, and the reporting to swap data repositories (“SDRs”), of data regarding swap transactions in order to enhance transparency, promote standardization, and reduce systemic risk.3 Pursuant to these CEA amendments, the Commission added to its regulations part 45, 4 which sets forth recordkeeping rules, and rules for the reporting of swap transaction data to SDRs.
Under the authority granted by section 21(b) of the CEA, which, among other things, directs the Commission to “prescribe standards that specify the data elements for each swap that shall be collected and maintained” by an SDR,5 the Commission, in its part 45 regulations, prescribed the use of a unique product identifier and product classification system in recordkeeping and swap data reporting.6 Regulation § 45.7 provides that each swap shall be identified in all recordkeeping and all swap data reporting pursuant to part 45 by means of a unique product identifier and product classification system as specified in this section.
Regulation § 45.7 sets forth requirements for the elements and Commission designation of a unique product identifier and product classification system.8 The unique product identifier and product classification system must identify and describe the swap asset class and the sub-type within that asset class to which the swap belongs, and the underlying product for the swap, with sufficient distinctiveness and specificity to: (i) enable the Commission and other regulators to fulfill their regulatory responsibilities, and (ii) assist in real-time public reporting of swap transaction and pricing data pursuant to part 43. 9 The level of distinctiveness and specificity which the unique product identifier will provide is required to be determined separately for each asset class.10 Further, upon its required determination that an acceptable unique product identifier and product classification system that contains the § 45.7 required elements is available, the Commission must designate this identifier and system for use in recordkeeping and swap data reporting.11
When it adopted § 45.7 in 2012, the Commission acknowledged the absence of a unique product identifier or product classification system that adequately classified and described swaps products. 12 The Commission noted that the Bank for International Settlements Committee on Payment and Settlement Systems (“CPSS”) and the Board of the International Organization of Securities Commissions (“IOSCO”) had recommended that the “Financial Stability Board direct further international consultation and coordination by financial and data experts from both regulators and industry” concerning the creation of a swaps product classification system.13
