©2013 International Swaps and Derivatives Association, Inc.

ISDA® is a registered trademark of the International Swaps and Derivatives Association, Inc.

Best Practice Approach to Global Unique Trade Identifiers (UTI)

2013 November 12

• ISDA Reference Data & Workflow Working Group – Introduction

• Global UTI Workflow Whitepaper – Scope; Key Principles

• UTI Prefix – Construct and Waterfall

• UTI Communication Flows – Selected Examples

• Conclusion and Next Steps

2

Agenda

ISDA Reference Data & Workflow

Working Group

Introduction

3

ISDA Reference Data & Workflow Working Group

Within Industry Governance Committee (IIGC) infrastructure

4

ISDA Reference Data & Workflow Working Group Data & Reporting Governance structure

Communications*

Data & Reporting RIC

Appointed workflow workstream

with dedicated working group

Coordination of efforts relating to

reporting workflows & technical

application of data and product

standards

UTI/USI

OTC Workflows

Expanded ISDA

Coordination with (i) other

IIGC Forums and (ii) Regional

Policy Leads

IIGC

US Reporting Compliance WG

Compliance workstream with

dedicated US working group

Coordination of US regulatory

discussions with CFTC & SEC

PreLEIs/LOUs

Lifecycle Events

Multiple SDRsCaptive SDRs

Historical Trade

Populations

Alpha Trades

Industry Outreach & Communications*

Data & Reporting Governance Framework

Appointed workstream chairs

and full IIGC representation

Programme Oversight and

direction Setting

FMLG

ISDA Legal WG

ISDA EMIR 1 WG

ISDA Product WGs

SIFMA/AFME

FOA

Vendors

Reference Date - Workflow

Working Group

FPML Standards

Committee

Technical data

standards oversight

Compliance workstream with

dedicated EU working group

Coordination of EU regulatory

discussions between ESMA & other

National Competent Authorities

Product

Identification

Cpty

Identification

FAQ Responses

EU Workflows

EU Reference

Data

Regulator

Interactions

EU Reporting Compliance WG

Compliance workstream with 2

dedicated working groups

Coordination of regulatory

discussions and developments

across Asia regulators

Asia

SEF Reporting

Extra-

territoriality

Privacy Laws

SEC Compliance

Dates

Complex &

Bespoke

Block Trade

Indicator

No-Action

Requests

Reporting

Valuation Data

for Cleared

Swaps

JAPAN| JFSA

AEJ | HKMA AEJ | MAS

ISDA Staff: Tara Kruse (NYC)

Industry Chair: Clare Eastburn (Citi)

PMO: Satori

ISDA Staff: Karel Engelen & Tara Kruse

(NYC) / Ind. Chair: Catherine Napolitano

(BAML) / PMO: TBD

Regulators

ISDA Staff: Clive Ansell (LDN)

Industry Chair: Paul Nichol (BAML),

Carole Sandrini (SG)

PMO: Sapient

ISDA AEJ Staff: Jeffrey Kan (HK); Ind.

AEJ Chairs: Shannon Spriggs (Macq),

David Noyce (SC) & Gary Lok (MS).

ISDA Japan Staff: Kaori Horaguchi (TKY)

Ind. Japan Chairs: Keiko Fukuda (MS),

Keiko Echigo (ML) / PMO: Sapient

Industry Chairs: Stuart McClymont

(DB) / Oliver Stuart (MS)

ISDA Staff: Karel Engelen(NYC)

PMO: Sapient

AEJ Reporting Compliance WG

Japan Reporting Compliance WG

AEJ | ASIC

KEY: Update Forum OnlyEstablished ISDA Forum Working Group focus areas

Delegated

Reporting

Compliance workstream with

dedicated RU working group

Coordination of RU regulatory

discussions with FFMS/Central

Bank.

RU Reporting Compliance Group

ISDA Staff: Karel Engelen

Industry Chair: Bert Moyaers (BNPP),

Jacek Kubas (EBRD)

PMO: Sapient

Master

Agreements

Russian entity

definition

Quarterly

Repoting

FX Swaps

Reconciliation

Collateral

Reporting

Russian Resident

definition

Global UTI Workflow Paper:

“Unique Trade Identifier (UTI): Generation,

Communication and Matching”

Scope and Goals

6

Scope and Goals

• “Unique Trade Identifier (UTI): Generation, Communication and Matching”

• Scope: an overview of generation, communication and matching of the Unique

Trade Identifier (UTI).

• Counterparties need to report using a common identifier to be compliant with

regulation.

• The paper:

– Outlines best practices, unless otherwise negotiated between Parties.1

– Follows findings conveyed in ISDA’s “Unique Swap Identifier (USI): An

Overview Document.” (updated 5 September 2013)

– Is a living document, so will be updated in as a result of discussions and

views of industry participants and evolving trading standards and practices.

Global UTI Workflow whitepaper

7

1 Note that the best practice UTI construct outlined in this whitepaper is not subject to bilateral negotiation

Global UTI Workflow Paper:

“Unique Trade Identifier (UTI): Generation,

Communication and Matching”

Key Principles

8

Key Principles - Overview

1) All trades should have a Unique Trade Identifier (UTI) which is generated,

communicated and, for historical trade populations, matched.

2) If a trade requires a Unique Swap Identifier (USI), this should be used as UTI.

3) Determination of who generates the UTI for paper trades should follow existing

industry best practices for that asset class. For trades where the UTI Generating

Party (GP) is unclear, the Parties can agree bilaterally on who will be the UTI GP

Examples include2:

• FX – Seller of the option will generate UTI.

• Credit - Where floating rate payer (seller) can be identified, then float rate

payer generates UTI.

• Rates – For a Fix-Float IRS, the payer of fixed will generate UTI.

• Equities - Seller of performance on any product in the taxonomy will generate

UTI.

2 Refer to “Unique Trade Identifier (UTI): Generation, Communication and Matching” for further details.

Global UTI Workflow whitepaper

9

Key Principles – Overview (cont’d)

4) UTI generation, communication and matching should occur at earliest possible

point in trade flow. In order of preference:

• Centrally executed trades: reference is generated and communicated at

point of execution on a platform that can generate a UTI and ensure

uniqueness.

• Up-front affirmed: reference is generated and communicated at point of

submission to an affirmation platform or service.

• Electronic confirmation matched (post-trade): reference is generated at

submission and communicated at point of confirmation.

• Paper trades: unless otherwise communicated, a reference is generated by

individual firms who share via paper, and update their reporting to reference

the UTI for the trade, once agreed by Parties.

Global UTI Workflow whitepaper

10

Global Unique Trade Identifier (UTI) Prefix

Construct and Waterfall

11

UTI Prefix Construct & Waterfall

• In order to ensure uniqueness across all reportable transactions, a

Unique Trade Identifier (UTI) is comprised of 2 parts, illustrated on slide

“UTI Prefix and UTI Construct”:

1. a UTI Prefix that is unique to the party generating the UTI; and

2. a Transaction Identifier

• Provided the UTI Generating Party (GP) ensures it always issues a new

Transaction Identifier in relation to their UTI Prefix, each UTI should be

unique.

• In order to ensure each party has a reserved UTI Prefix, the industry has

agreed the approach described on slides “UTI Prefix Waterfall.”

Based on the global (pre-)LEI system

12

UTI Prefix Construct & Waterfall

• Parties should first look to use the CFTC USI Namespace as UTI prefix.

• Since the USI Namespace is only available to those who register with the

CFTC3, not all trading counterparties are going to have one.

• If a Party has neither, and needs to generate a UTI for global reporting,

use characters 7-16 of the global (pre-)LEI as the 10 character UTI prefix.

3 For CFTC specifications on USI Namespace, refer to "Unique Swap Identifier (USI) Data Standard" 2012 October 1. http://www.cftc.gov/ucm/groups/public/@swaps/documents/dfsubmission/usidatastandards100112.pdf

Based on the global (pre-)LEI system

13

Yes Use the Namespace as

UTI Prefix

Yes Use characters 7-16 as UTI

prefix

No Obtain a 20 character

global LEI

Use characters 7-16 as UTI prefix

Do you have a CFTC USI Namespace?

No Have a 20 character

global LEI?

Waterfall4 - UTI Prefix

4 (a) If a trade is not reportable to the CFTC, but a Party has a USI Namespace, that USI Namespace should still be used. (b) For UTI prefix, the European Association of Clearing Houses (EACH) recommends that CCPs use the CFTC Namespace where possible. Where a CCP does not have a CFTC issued Namespace, EACH proposes CCPs use the Market Identifier Code (MIC), a 4 alpha character code (ISO 10383), to create the 10 character "MIC Namespace" UTI prefix by starting with 3 zeros, followed by the MIC code, and then three additional zeros. For example “000CCPA000.”

Based on the global (pre-)LEI system

14

Construct - UTI Prefix and UTI

Based on the global (pre-)LEI system5

15

UTI Prefix Construct:

UTI Construct = UTI Prefix + Transaction Identifier:

5 FSB, “Third progress note on the Global LEI Initiative” Annex 2, October 2012. LEI ROC, “Allocation of Pre-LOU Prefixes for Pre-LEI Issuance” 14 June 2013.

6 International Organization for Standardization, "ISO 17442:2012 Financial services – Legal Entity Identifier (LEI)“ http://www.iso.org/iso/home/search.htm?qt=17442&sort=rel&type=simple&published=on

UTI Communication Flows

Select Flows from Whitepaper

16

Platform Party A Party B TR

Execution

Platform generates UTI (UTI1)

Party B reports UTI1

Party A reports UTI1

Platform shares UTI1 with Party B

See “Unique Trade Identifier (UTI): Generation, Communication and Matching” workflow 4.1.1

Platform shares UTI1 with Party A

1

4

3

2

3

4

Electronic Execution No Allocation

17

Party A Party B TR

Execution b/w Parties B (in this example) generates UTI1

Exchange Confirms; UTI generator B includes UTI1

Party A reports with own trade reference, if UTI1 has not been received by time of reporting

B reports with UTI1

Party A re-reports with UTI1

1

2

3

3

4

5

Paper Trades

18 See “Unique Trade Identifier (UTI): Generation, Communication and Matching” workflow 4.2.3

Party A Party B Middleware TR

Execution

Middleware generates UTI (alpha)

Middleware shares alpha UTI w/ Party A

Middleware can report for Parties, or Parties can report themselves

Party A can report trade with alpha UTI themselves

1

2

3

3

4

4

Middleware shares alpha UTI w/ Party B

Broker

Trade input into Middleware by Broker or one of the Parties

4

Party B can report trade with alpha UTI themselves

3

Cleared Flow – Affirm in Middleware Alpha Trade

19 See “Unique Trade Identifier (UTI): Generation, Communication and Matching” workflow 4.2.4

Party A Party B Middleware TR

Trade can also be reported by Party B to TR with gamma UTI (Lifecycle event)

7

6

6

7

7

CCP

CCP reports trade to TR with beta/gamma UTIs (Lifecycle event)

UTI for alpha is sent to CCP by Party A/B or Middleware

Upon clearing, CCP sends new UTI (gamma) to Party B for gamma trade (direct or via Middleware).

Trade can also be reported by Party A to TR with beta UTI (Lifecycle event)

Trade can also be reported by Middleware to TR with beta/gamma UTIs (Lifecycle event) 7

Upon clearing, CCP sends new UTI (beta) to Party A for beta trade (direct or via Middleware).

Cleared Flow - Affirm in Middleware

5

5 UTI for alpha is sent to CCP by Party A/B or Middleware

Beta and Gamma legs

20 See “Unique Trade Identifier (UTI): Generation, Communication and Matching” workflow 4.2.4

Remaining Stepping Out Stepping In TR

1

5

3

5

Middleware

Original Trade w/ already determined original UTI (UTI1)

Middleware shares UTI2 with Remaining Party

Stepping In Party can report trade themselves (UTI2) 5

Novated over Middleware Trade between original Parties is agreed and already has UTI 1.

Stepping out Party alleges novation in Middleware Stepping in Party agrees novation in Middleware

2 Remaining Party agrees novation in Middleware

2

Middleware generates new UTI (UTI2).

Middleware shares UTI2 Stepping In Party 4

Middleware can report trade for Parties (UTI2)

Remaining Party can report trade themselves (UTI2) 5

Stepping Out Party may need to report they are no longer Principal (UTI 1)

21 See “Unique Trade Identifier (UTI): Generation, Communication and Matching” workflow 4.4.1

Conclusion and Next Steps

22

Conclusion and Next Steps

• Achieve broad industry agreement.

• ISDA Reference Data & Workflow Working Group will continue to meet regulators

and industry groups to socialize whitepaper.

• As it is a living document, will be periodically updated in line with evolving

standards and practices, and discussions and industry views.

• Further questions or comments? Contact Karel Engelen at KEngelen@isda.org

and Tara Kruse at TKruse@isda.org

Global UTI Workflow whitepaper

23