[Federal Register Volume 88, Number 37 (Friday, February 24, 2023)]
[Rules and Regulations]
[Pages 11790-11793]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-03661]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 45


Order Designating the Unique Product Identifier and Product 
Classification System To Be Used in Recordkeeping and Swap Data 
Reporting

AGENCY: Commodity Futures Trading Commission.

ACTION: Order.

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SUMMARY: 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.

DATES: The Order of Designation is effective on February 24, 2023.

FOR FURTHER INFORMATION CONTACT: Tom Guerin, Assistant Chief Counsel, 
Division of Market Oversight, (202) 836-1933, [email protected] or Owen 
Kopon, Associate Chief Counsel, Division of Market Oversight, (202) 
418-5360, [email protected], Commodity Futures Trading Commission, Three 
Lafayette Centre, 1151 21st Street NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

A. Unique Product Identifiers: CEA Section 21(b) and Section 45.7 of 
the Commission's Regulations

    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.
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    \1\ Public Law 111-203, 124 Stat. 1376 (2010).
    \2\ 7 U.S.C. 1-26.
    \3\ See, e.g., 7 U.S.C. 2(a)(13)(G), which requires all swaps, 
whether cleared or uncleared, to be reported to an SDR; 7 U.S.C. 
24a(b), which directs the Commission to prescribe standards for swap 
data reporting and attendant recordkeeping.
    \4\ Swap Data Recordkeeping and Reporting Requirements, 77 FR 
2136 (January 13, 2012).
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    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 Sec.  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.\7\
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    \5\ 7 U.S.C. 24a(b)(1).
    \6\ 17 CFR 45.7.
    \7\ Id. Regulation Sec.  45.7 provides that each swap 
sufficiently standardized to receive a unique product identifier 
shall be identified by a unique product identifier while each swap 
that is not sufficiently standardized shall be identified by its 
description using the product classification system.
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    Regulation Sec.  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 Sec.  45.7 required elements is available, the 
Commission must designate this identifier and system for use in 
recordkeeping and swap data reporting.\11\
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    \8\ 17 CFR 45.7(a).
    \9\ Id. Real-time public reporting of swap transaction and 
pricing data pursuant to part 43 seeks to enhance transparency and 
price discovery of the swaps market. Publishing a unique product 
identifier as part of the swap transaction and pricing data for a 
transaction would provide information needed to describe the 
publicly reportable swap transaction and enable market participants 
and the public to compare such publicly reportable swap transaction 
to other similar publicly reportable swap transactions.
    \10\ Id.
    \11\ 17 CFR 45.7(b).

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[[Page 11791]]

    When it adopted Sec.  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\
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    \12\ See 77 FR at 2165-66.
    \13\ Id. The Financial Stability Board (FSB) is an international 
body that monitors and makes recommendations about the global 
financial system. Members of the FSB include the Board of Governors 
of the Federal Reserve System, Department of the Treasury, and the 
Securities and Exchange Commission. The Commission, though not an 
FSB member, is a member of IOSCO.
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B. CPMI and IOSCO Technical Guidance on the Harmonization of the Unique 
Product Identifier

    Following a meticulous, conscientious process of international 
coordination, the Bank for International Settlements Committee on 
Payments and Market Infrastructures (``CPMI'') and IOSCO published 
Technical Guidance on the Harmonization of the Unique Product 
Identifier (``UPI Technical Guidance'') during September 2017.\14\ CPMI 
and IOSCO, in the UPI Technical Guidance, specify the requirements 
necessary for a product identifier to facilitate the reporting of swap 
data to trade repositories and the aggregation of such data by 
authorities.\15\ CPMI and ISOCO concluded that semantically meaningless 
codes should be assigned to each unique product, with the product 
attributes associated with each code discoverable by reference to 
standardized tables (``Reference Data Library'').\16\ CPMI and IOSCO, 
in the UPI Technical Guidance, require that the Reference Data Library 
contain specific reference data elements that vary by asset class. 
These required reference data elements detail the asset class, asset 
class sub-types, underlying asset, and other swap product 
attributes.\17\ CPMI and IOSCO also concluded that a unique product 
identifier should satisfy fifteen distinct technical principles,\18\ 
and appointed the FSB to designate one or more service providers to 
issue product codes and operate and maintain the Reference Data 
Library, upon determining such provider would meet the principles in 
doing so.\19\
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    \14\ CPMI and IOSCO, Technical Guidance: Harmonisation of the 
Unique Product Identifier, (Sept. 2017), available at: https://www.iosco.org/library/pubdocs/pdf/IOSCOPD580.pdf.
    \15\ Id.
    \16\ Id.
    \17\ Id.
    \18\ Id. The fifteen technical principles identified by CPMI and 
IOSCO are: jurisdiction neutrality, uniqueness, consistency, 
persistence, adaptability, clarity, ease of assignment/retrieval/
query, long-term viability, scope neutrality, compatibility, 
comprehensiveness, extensibility, precision, public dissemination, 
and representation.
    \19\ Id.
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    The Commission played an integral role in the creation of the UPI 
Technical Guidance. In addition to approving the issuance of the 
guidance as an IOSCO Member, the Commission co-chaired the joint CPMI 
and IOSCO workgroup that drafted the guidance. In this key position, 
the Commission was able to ensure that the UPI Technical Guidance 
defined a unique product identifier at a level of specificity and 
distinctiveness that met the needs of the Commission.

C. FSB Designation of the Derivatives Service Bureau Limited

    The FSB proposed that an entity or entities (``UPI Service 
Provider'') provide for the timely issuance of unique product 
identifier codes and maintenance of the Reference Data Library.\20\ The 
FSB published a call for self-assessments from prospective UPI Service 
Providers during July 2018.\21\ The FSB requested that each prospective 
UPI Service Provider submit business and self-governance plans that 
explained how the respondent could satisfy the UPI Technical Guidance 
and certain other governance criteria.\22\ After reviewing the self-
assessments in coordination with CPMI and IOSCO, the FSB designated the 
Derivatives Service Bureau Limited (``DSB'') as the UPI Service 
Provider.\23\
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    \20\ See, e.g., FSB, Governance arrangements for the unique 
product identifier: key criteria and functions, (Oct. 2017), 
available at: https://www.fsb.org/wp-content/uploads/P031017.pdf.
    \21\ FSB, Self-assessment questionnaire for prospective UPI 
Service Providers, (July 2018), available at: https://www.fsb.org/wp-content/uploads/P160718-2.pdf.
    \22\ Id.
    \23\ FSB, Press Release: FSB designates DSB as Unique Product 
Identifier Service Provider (May 2, 2019), available at: https://www.fsb.org/2019/05/fsb-designates-dsb-as-unique-product-identifier-upi-service-provider/.
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    The FSB published its final conclusions and implementation plan 
regarding governance arrangements for the unique product identifier 
system during October 2019 (``UPI Governance Report'').\24\ The FSB, in 
the UPI Governance Report, enumerated the components of unique product 
identifier governance arrangements and allocated governance functions 
among the components. The components identified by the FSB include a 
UPI Service Provider(s) that would issue unique product identifier 
codes and maintain the Reference Data Library, and an International 
Governance Body that would provide overall oversight of the UPI Service 
Provider and the broader unique product identifier system.\25\ The FSB 
also recommended that FSB jurisdictions undertake any actions relevant 
to their situation to require the reporting of unique product 
identifier codes to trade repositories in a manner consistent with the 
UPI Technical Guidance and the UPI Governance Report.\26\
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    \24\ FSB, Governance arrangements for the UPI: Conclusions, 
implementation plan, and next steps to establish the International 
Governance Body, (Oct. 2019), available at: https://www.fsb.org/wp-content/uploads/P091019.pdf.
    \25\ Id. The FSB identified the Legal Entity Identifier 
Regulatory Oversight Committee (``ROC'') as the entity best situated 
to be the International Governance Body. The ROC is a group of more 
than 65 financial markets regulators and other public authorities 
and 19 observers from more than 50 countries that promotes the broad 
public interest by improving the quality of data used in financial 
data reporting, improving the ability to monitor financial risk, and 
lowering regulatory reporting costs through the harmonization of 
these standards across jurisdictions. The Commission is a ROC 
member. Since assuming responsibilities as the International 
Governance Body, the ROC has provided oversight of DSB.
    \26\ Id.
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    The Commission played a central role in the FSB's review of self-
assessments from prospective UPI Service Providers and in the creation 
of the UPI Governance Report. The Commission co-chaired the FSB 
workgroup that both reviewed self-assessments from prospective UPI 
Service Providers and drafted the UPI Governance Report. In this key 
role, the Commission was able to assist the FSB in ensuring that any 
UPI Service Provider designated by the FSB had demonstrated an intent 
and ability to comply with the UPI Technical Guidance.
    The Commission is a member of the ROC and participates in oversight 
of the unique product identifier system and DSB consistent with the UPI 
Governance Report. The Commission also co-chairs the ROC committee that 
focuses on oversight of DSB. In these roles at the ROC, the Commission 
is able to assist the ROC in meeting its FSB-mandated responsibility to 
oversee DSB and its adherence to the UPI Technical Guidance.

[[Page 11792]]

II. Commission Determination of an Acceptable Unique Product Identifier 
and Product Classification System

    For reasons explained below, the Commission has determined that the 
unique product identifier codes issued by DSB for swaps in the credit, 
equity, foreign exchange, and interest rate asset classes (``Covered 
Asset Classes'') are acceptable to the Commission and satisfy the 
requirements set forth in part 45.7 of the Commission's regulations in 
that they identify and describe swap products 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.

A. The UPIs Issued by DSB for Swaps in the Covered Asset Classes 
Identify and Describe Swap Products With Sufficient Distinctiveness and 
Specificity To Enable the Commission and Other Regulators To Fulfill 
Their Regulatory Responsibilities

    DSB issues unique product identifier codes for swaps in the Covered 
Asset Classes in a manner consistent with the UPI Technical Guidance. 
In accordance with the UPI Technical Guidance, each unique product 
identifier code issued by DSB for swaps in the Covered Asset Classes 
maps to a Reference Data Library containing specific reference data 
elements that vary by asset class. These required reference data 
elements detail the asset class, asset class sub-types, underlying 
asset, and other swap product attributes.\27\
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    \27\ The Commission and other financial regulators coordinated 
under the auspices of CPMI and IOSCO to define the UPI Technical 
requirements as including a requirement that the UPI have sufficient 
detail and level of granularity to enable authorities to fulfil 
their regulatory responsibilities. CPMI and IOSCO, Technical 
Guidance: Harmonisation of the Unique Product Identifier at p.11.
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    Identification of swaps using unique product identifier codes 
issued by DSB in the Covered Asset Classes would enable the Commission 
and other regulators to aggregate swap transaction data at various 
levels of product classification, providing enhanced transparency of 
market activity and facilitating oversight of the swaps markets. For 
example, the reporting of unique product identifier codes issued by DSB 
to all four SDRs provisionally registered with the Commission would 
enable the Commission to not only aggregate transactions by unique 
product identifier code across all SDRs, but to aggregate by any 
reference data element contained in the Reference Data Library. This 
would allow the Commission to aggregate not just all interest rate swap 
transactions with the same unique product identifier, but also to 
aggregate all interest rate swap transactions referencing the same 
underlying interest rate index.
    Combined with other standardized identifiers already used in swaps 
recordkeeping and reporting, such as legal entity identifiers, unique 
product identifier codes issued by DSB will provide a crucial 
regulatory tool to facilitate the Commission's ability to link and 
aggregate data to detect and mitigate systemic risk and prevent market 
manipulation, among other important purposes of the Dodd-Frank Act.\28\
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    \28\ For example, the aggregation of open credit swap 
transactions by underlier and counterparty would provide the 
Commission transparency into market participants' exposures to 
credit events associated with particular underliers.
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B. The UPIs Issued by DSB for Swaps in the Covered Asset Classes 
Identify and Describe Swap Products With Sufficient Distinctiveness and 
Specificity To Assist in the Real Time Reporting of Swaps as Provided 
in the CEA and the Commission's Regulations

    Unique product identifier codes issued by DSB for swaps in the 
Covered Asset Classes would assist the real time reporting of swaps 
required by the CEA and part 43 of the Commission's regulations in 
several important ways. Most importantly, inclusion of unique product 
identifier codes issued by DSB in real-time public swaps reports will 
assist public transparency because those codes identify products with 
sufficient precision to allow for price discovery.\29\ The inclusion of 
unique product identifier codes issued by DSB in real-time public swaps 
reports will also assist in increasing the standardization of real time 
public reporting across SDRs and facilitating a more efficient 
reporting of swap products. Instead of the different product 
identifiers and classification systems currently used across SDRs, the 
inclusion of unique product identifier codes issued by DSB in all 
public disseminations for swaps in the Covered Asset Classes will 
facilitate the price discovery of swap transactions in the same product 
that are published by different SDRs. This will enable market 
participants and the public to more easily compare a publicly 
reportable swap transaction published by one SDR with publicly 
reportable swap transactions relating to the same product published by 
a different SDR. Additionally, the inclusion of unique product 
identifier codes issued by DSB in real-time swap reports will enable 
the communication of many product characteristics in a single data 
field. Since unique product identifier codes issued by DSB link to the 
Reference Data Library maintained by DSB, the reporting of the code in 
a single data field negates the need for the reporting of the 
associated data contained in the Reference Data Library. This assists 
real-time public reporting by reducing the number of data fields 
required to be transmitted to facilitate price discovery.
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    \29\ The Commission and other regulators coordinated under the 
auspices of the CPMI and IOSCO to define the swap asset class, asset 
class sub-types, and level of required precision that was necessary, 
determined separately for each asset class, to support the real-time 
public reporting of swap transaction and pricing data.
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III. Order of Designation of the Unique Product Identifier and Product 
Classification System To Be Used in Recordkeeping and Swap Data 
Reporting Pursuant to the Commission's Regulations for Swaps in the 
Credit, Equity, Foreign Exchange, and Interest Rate Asset Classes

    Based upon the foregoing, including the following facts:
    (1) The Commission played an integral role in the creation of the 
UPI Technical Guidance to ensure that the guidance defined a unique 
product identifier at a level of specificity and distinctiveness that 
met the needs of the Commission.
    (2) The Commission worked with FSB to ensure that any UPI Service 
Provider designated by the FSB had demonstrated an intent and ability 
to comply with the UPI Technical Guidance.
    (3) The UPI Technical Guidance requires that the Reference Data 
Library contain specific reference data elements that vary by asset 
class, detailing the asset class, asset class sub-types, underlying 
asset, and other swap product attributes.
    (4) In accordance with the UPI Technical Guidance, each unique 
product identifier code issued by DSB for swaps in the Covered Asset 
Classes maps to a Reference Data Library containing specific reference 
data elements that vary by asset class. These required reference data 
elements detail the asset class, asset class sub-types, underlying 
asset, and other swap product attributes.
    Accordingly, the Commission FINDS that, as required by Commission 
regulation Sec.  45.7, the unique product identifiers issued by DSB for 
swaps in the credit, equity, foreign exchange, and interest rate asset 
classes are acceptable to the Commission and satisfy the requirements 
set forth in part 45.7 of the Commission's regulations.

[[Page 11793]]

    Therefore:
    It is hereby ordered that:
    1. Pursuant to section 21(b) of the Act and Commission regulation 
Sec.  45.7, the product identifiers issued by the Derivatives Service 
Bureau Limited as unique product identifiers (DSB UPIs) for swaps in 
the credit, equity, foreign exchange, and interest rate asset classes 
are designated as the unique product identifier and product 
classification system to be used in recordkeeping and swap data 
reporting pursuant to the Commission's regulations; this Order gives 
notice of this designation.
    2. Registered entities and swap counterparties shall use DSB UPIs 
for swaps in the credit, equity, foreign exchange, and interest rate 
asset classes in all recordkeeping and swap data reporting pursuant to 
Part 45, and shall similarly use DSB UPIs for swaps in the credit, 
equity, foreign exchange, and interest rate asset classes to facilitate 
real-time public reporting as required by Part 43.
    3. The Commission expects compliance with paragraph 2., above, by 
no later than January 29, 2024. For this purpose, registered entities 
and swap counterparties may contact the Derivatives Service Bureau 
Limited at: 107 Cheapside, London, EC2V 6DN, England, +44 20 3880 2200, 
DSB.com">Secretariat@ANNA-DSB.com. Information concerning the procedures for 
acquiring DSB UPIs may be accessed at https://www.anna-dsb.com/upi/.

    Authority: 7 U.S.C. 24a(b).

    Issued in Washington, DC, on February 16, 2023, by the 
Commission.
Robert Sidman,
Deputy Secretary of the Commission.


    NOTE:  The following appendices will not appear in the Code of 
Federal Regulations.

Appendices To Order Designating the Unique Product Identifier and 
Product Classification System To Be Used in Recordkeeping and Swap Data 
Reporting--Voting Summary and Chairman's and Commissioner's Statement

Appendix 1--Voting Summary

    On this matter, Chairman Behnam and Commissioners Johnson, 
Goldsmith Romero, Mersinger, and Pham voted in the affirmative. No 
Commissioner voted in the negative.

Appendix 2--Statement of Commissioner Christy Goldsmith Romero in 
Support of Increasing Transparency in Swap Markets Through the Use of 
Unique Product Identifiers

    Swap data reporting is fundamental to post-crisis financial 
regulation. Given the important goal of the Dodd-Frank Act to bring 
transparency to risk in swap markets that was previously hidden, I 
support the Commission's designation of unique product identifiers 
for swap data reporting.
    By increasing visibility into swap markets through real-time 
public reporting and swap data repository reporting, the Commission 
brought light to what was previously an opaque market with hidden 
risk. Swap data reporting increases regulatory insight into swap 
market activity, which is necessary to promote market integrity. 
Real-time public reporting also promotes transparency and price 
discovery by making swap transaction and pricing information 
publicly available.
    As swap markets are global markets, global harmonization 
enhances the use of swap data for regulators, market participants, 
and the public. The CFTC has been collaborating with global 
regulators on uniform standards for defining and representing swap 
products. I look forward to increased transparency in swap markets 
through the use of standardized product identifiers.

[FR Doc. 2023-03661 Filed 2-23-23; 8:45 am]
BILLING CODE 6351-01-P