MIFIR / EC consults on unique product identifier (UPI)

Background

The European Commission initiated the MiFIR/MiFID II review in late 2021 to enhance the EU’s competitiveness in business. The review, known as the ‘MiFIR Review,’ aims to refine the complex derivatives transparency regime and eliminate barriers to the establishment of an EU-wide derivatives consolidated tape. In October 2023, the Level 1 MiFIR Review text was approved, outlining a tailored transparency regime for OTC derivatives denominated in specific currencies and targeting two sub-asset classes: Interest Rate Derivatives (IRS) and Credit Default Swaps (CDS).

The focus has now shifted to Level 2, where detailed rules for the MiFIR Review are being developed.

A key point of discussion is the selection of an OTC derivatives identifier to enhance market price transparency, with the Commission seeking input on this matter and the potential reporting of additional reference data.

2 identifiers are being considered: ISIN and UPI*

What is a UPI *

The UPI, or Unique Product Identifier, is a unique alpha-numeric code comprised of up to 52 characters that is assigned to a securities trade. This enables a trade to be tracked from end to end throughout the lifecycle of its settlement. It is positioned between the CFI code and the ISIN in terms of granularity.

The purpose of the UPI is to provide a more detailed identification framework for OTC derivatives, allowing for aggregation and meaningful analysis of instrument pricing across different periods.

The consultation document covers the following two issues:

• What is the most suitable unique product identifier to be used for compliance with the transparency requirements applicable to in-scope OTC derivatives?
• Are there any ‘additional identifying reference data’ to be considered in addition to the unique product identifier?

What next?

The consultation closed on 9 January 2024. The Commission will decide which approach to mandate and is expected to publish its final rules by mid-2024.

ABBL answer to Targeted consultation on the selection of a unique product identifier for public transparency