UTI Connect

When we first started talking with customers at the beginning of the year around UTI sharing challenges, it was clear that with the regulatory changes coming down the line both in the EMIR REFIT and JFSA Rewrite, customers would need to consider this in their implementation plans. This was driven by a number of factors:

• ESMA has commented in their guidelines that firms should disseminate UTIs by 10am UTC T+1
• ESMA has stated in their guidelines that temporary UTIs should not be used
• JFSA has introduced dual sided reporting and thus both counterparties are to use the same UTI for their submissions

As part of the UTI waterfall, firms that trade with counterparties that are outside of their jurisdiction and have a sooner reporting deadline obligation should be the UTI receiver - this lays the path to the harmonization of global UTI.

I have just come back from a visit to Tokyo to see our Japanese customers and it is good to see that they have placed a high priority in UTI pairing and sharing in their project plan. From the moment our team in Japan engaged with customers on this pre-pairing concept, they have always been keen to understand how a similar model to our SFTR solution could be adopted in derivatives reporting. Whilst the sharing of UTI within the same jurisdiction is a given, our customers in Japan have been eager to address the sharing of UTIs across jurisdictions sooner rather than later and this shows that customers are taking the global UTI harmonization aspect seriously.

So, what else did we learn from our interactions in Japan around UTI?

The paper confirmation space was where they see the most challenges, considering it is a daily occurrence in their trading activity.

As the practice is quite manual, they see it as a good opportunity to streamline operational processes.

Determination of the UTI generator can be complicated, as some customers have this agreement on a per asset level as opposed to a per LEI level.

Non standardization in booking practices particularly around TARFs and FX options may potentially result in a mismatch of UTIs being reported by both counterparties.

Suffice to say this is largely in line with what we have been hearing from customers in Europe from our conversations of how we can help with Global UTI Connect. It's pleasing to see whilst this discussion originated from a different product and regulation in Europe, it has transcended to our Japanese customers, and we expect to have further follow up conversations with the rest of APAC as their rewrites go live in late 2024.

We are working with customers to target a launch for Global UTI Connect on April 1st 2024, which is in line with the JFSA rewrite go-live date and this will be shortly followed by EMIR REFIT on April 29th 2024.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.