financial instruments chart, derivaties

Global policymakers are taking steps to create oversight for over-the-counter (OTC) derivatives transactions as part of a long-running effort to enhance transparency in global OTC derivatives markets in response to the financial crisis.

The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a paper on Wednesday on governance arrangements for critical OTC derivatives data that is to be reported to trade repositories.

At the same time, the Financial Stability Board (FSB) published its own report on governance arrangements for Unique Product Identifiers (UPIs), which are being implemented to ensure that products involved in OTC derivatives transactions can be individually identified. This will enable regulators to aggregate data on OTC derivatives transactions by product.

These efforts to enhance OTC derivatives trade reporting data are designed to enable regulators to better assess systemic risk and detect market abuse.

“Aggregation of the data being reported across [trade repositories] will help [regulators] to obtain a comprehensive view of the OTC derivatives market and activity. Such aggregation is feasible only if standardization and harmonization of important data elements is completed,” the FSB said.

Additionally, the FSB, along with IOSCO and CPMI, ruled that the Legal Entity Identifier Regulatory Oversight Committee is “best positioned” to become the global governance body for UPIs and Unique Transaction Identifiers (UTIs), provided that it makes certain adjustments to its existing structure.

In the meantime, the FSB will take on those functions.