30 May 2023
On 16 May 2023, the Monetary Authority of Singapore (“MAS”) published its response (“Response”) to feedback received from its consultation paper (“Consultation Paper”) relating to the reporting of the Unique Transaction Identifier (“UTI”) and the proposed revised reportable data fields under the Securities and Futures Act 2001 (“SFA”) and the Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013 (“SF(RDC)R”). The Consultation Paper, issued on 5 July 2021, sets out proposals to adopt the technical guidance published by the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions (“CPMI-IOSCO”) on the UTI (“UTI Technical Guidance”), Unique Product Identifier (“UPI”) (“UPI Technical Guidance”), and critical data elements (other than the UTI and UPI) (“CDE”) (“CDE Technical Guidance”) for over-the-counter (“OTC”) derivatives to facilitate the international standardisation and harmonisation of data elements reported across international OTC derivatives reporting regimes.
Key highlights of the Response are set out below.
Proposed approach for implementation of UTI
MAS proposed to align its requirements for the reporting of UTI with the UTI Technical Guidance by amending the current UTI reporting requirement in the SF(RDC)R and issuing guidelines (“Reporting Guidelines”) to provide clarity on MAS’ expectations in relation to UTI generation. The requirement to report the UTI data field will be in the First Schedule of the SF(RDC)R, and MAS’ expectations regarding the approach for UTI and UTI generation will be set out in the Reporting Guidelines.
Reporting of UTI and impact of life cycle events
MAS will proceed to require UTI to be reported with the characteristics and approach that are aligned with the UTI Technical Guidance. This involves requiring (1) reporting entities to report a UTI which is uniquely assigned to each reportable OTC derivatives contract, (2) the same UTI to be reported where that OTC derivatives contract is reported more than once due to the requirements of the SF(RDC)R or reporting requirements in another jurisdiction (other than Singapore), and (3) that the same UTI should remain as the identifier of the OTC derivatives contract throughout the life cycle of the contract. These expectations will be set out in the Reporting Guidelines.
In its Response, MAS clarified that where a package trade constitutes multiple reportable OTC derivatives contracts, a UTI should be generated and reported for each contract in the package. A “package identifier” data field will be added to identify OTC derivatives contracts entered into as part of a package trade.
General approach to determine responsibility for UTI generation
MAS consulted on two approaches to determine the entity responsible for generating the UTI (“UTI generating entity”): (1) to strictly follow the waterfall steps as set out in the UTI Technical Guidance (“Approach A”); or (2) to prioritise the step which called for the determination of cross-jurisdictional contracts (“Approach B”).
To minimise the chance of potential regulatory conflicts, MAS will adopt Approach A in determining the UTI generating entity. The detailed UTI generation steps will be set out in the Reporting Guidelines.
Following feedback, to provide additional flexibility, the Reporting Guidelines will, in addition to the steps in Approach A, provide that a reporting entity and its counterparty to an OTC derivatives contract may choose to instead agree on who the UTI generating entity should be.
UTI generation for OTC derivatives contracts which are only reportable under SFA
Most respondents supported the proposed approach to determine the UTI generating entity for OTC derivatives contracts which (1) are only subject to reporting obligations of one jurisdiction (i.e. a domestic contract), and (2) where only one counterparty or both counterparties to the contract had reporting obligations under the SFA.
Where only one counterparty is subject to reporting obligations under the SFA, MAS had proposed that the reporting entity generate the UTI. Where both counterparties are subject to reporting obligations under the SFA, MAS had proposed that the UTI-generator be determined in the following manner: (a) for contracts which are electronically confirmed, the confirmation platform will be the UTI-generator; (b) otherwise, the UTI-generator will be the entity as agreed by the counterparties; (c) otherwise, if the contract will be reported to a single trade repository, the trade repository will be the UTI-generator; (d) otherwise, as a last resort, one of the counterparties will be the UTI-generator, based on sorting of the identifiers of the counterparties with the characters of the identifier reversed and picking the counterparty that comes first in this sorted sequence.
Given the general support from respondents, MAS will adopt the proposals on determining the UTI generating entity in situations where an OTC derivatives contract is only reportable under the SFA. These will form part of the UTI generation steps set out in the Reporting Guidelines.
Responsibility to provide or obtain UTI in timely manner
MAS will proceed with requiring reporting entities to make reasonable efforts to provide or obtain the UTI (as applicable) in a timely manner.
Where a reporting entity has not obtained the UTI despite making reasonable efforts, MAS will allow reporting entities to report an interim-UTI with the expectation that reporting entities will continue to make reasonable efforts to obtain the UTI from the UTI generating entity. Where the reporting entity obtains the UTI subsequently, the reporting entity is to report the OTC derivatives contract with the UTI within two business days of obtaining the UTI. The interim-UTI previously reported should be reported in the “Prior UTI” data field to enable MAS to identify such contracts.
Proposed changes to reportable data fields in First Schedule of SF(RDC)R - UPI & CDE
MAS proposed amendments to the First Schedule to the SF(RDC)R to include additional data fields to allow MAS to monitor risks in the OTC derivatives market, and to align the definitions and allowable values of common data fields to the CDE Technical Guidance or with data fields required by other authorities to facilitate global reporting.
Proposed data fields, definitions and allowable values
Following feedback, MAS will amend the list of reportable data fields set out in the First Schedule to the SF(RDC)R by:
- adding data fields for “Package identifier”, “Asset class” and “Contract type”; and
- removing data fields for “Basket constituent unit of measure”, “Basket constituent number of units”, “Beneficiary 1” and “Beneficiary 1 identity type”.
MAS will adopt the requirement to report global UPI in the UPI field set out in the Reporting Guidelines. MAS also noted that the Derivatives Services Bureau Ltd, which was designated by the Financial Stability Board as the service provider of the global UPI system, has firmed up the go-live date for the global UPI system to be on 16 October 2023.
MAS will adopt the approach proposed in the Consultation Paper to report direction of the trade from the reporting entity’s perspective.
Collateral and margin
MAS proposed to exempt reporting of collateral and margin information by reporting entities who are not counterparties to an OTC derivatives contract, as such reporting entities are unlikely to have access to such information given their role as a facilitator of the contract. In its Response, MAS maintained the view that this exemption should not be extended to fund/real estate investment trust (“REIT”) managers executing OTC derivatives contracts on behalf of a fund/REIT that it manages, as it is reasonable to expect that they have access to collateral and margin information given their role as the manager. However, where a fund/REIT manager is executing an OTC derivatives contract for a portfolio that it does not manage, MAS views the fund/REIT manager’s role to be that of an agent facilitating the contract, and it would be consistent with the intent to exempt the reporting of collateral and margin information for such contracts.
MAS will thus proceed to adopt this proposal under a new regulation 7(2) of the revised SF(RDC)R, subject to conditions.
Foreign exchange swaps
MAS will require the reporting of foreign exchange (“FX”) swaps as two separate contracts. The reported two contracts will be required to be linked by the data field “FX swap link ID”.
Implementation timeline and approach
MAS sought feedback on the proposed implementation timeline for commencement of UTI requirements and the reporting of the revised reportable data fields including UPI (“Revised Requirements”). For existing contracts entered into prior to the commencement date of the Revised Requirements, MAS proposed requiring these existing contracts with maturity of at least one year as at the commencement date to be re-reported based on the revised First Schedule of the SF(RDC)R.
MAS will commence the Revised Requirements under the revised SF(RDC)R in October 2024, being approximately six months after the commencement of the European Market Infrastructure Regulation Refit and aligning with the commencement date of the revised rules of the Australian Securities and Investments Commission.
Treatment of existing contracts
To ensure that only one reporting format is adopted in the industry post-commencement of the Revised Requirements, MAS shall apply the re-reporting requirement to all OTC derivatives contracts outstanding as at the commencement date of the Revised Requirements. Changes to the existing reportable data fields for these outstanding OTC derivatives contracts must be reported under the new format based on the Revised Requirements within two business days of the variation. To reduce the industry’s operational burden in preparing for re-reporting, MAS will not require re-reporting of OTC derivatives contracts that have a maturity of less than six months from the commencement date of the Revised Requirements.
Following feedback, MAS will also provide an exemption for the reporting of any information required under the revised SF(RDC)R that was not previously captured at the point of time when the specified derivatives contract was executed.
For pre-existing contracts in transition between the current requirements and Revised Requirements, i.e. trades that are executed before the commencement date of the Revised Requirements but the details of its execution, change or termination have not yet been reported as the reporting deadline is after the commencement date of the Revised Requirements (“Transitional Trades”), MAS will continue to require such trades to be reported within two business days after its execution, change or termination. Transitional Trades that are reported after the commencement date of the Revised Requirements must be reported in compliance with the Revised Requirements.
Adoption of ISO 20022 standard
MAS will proceed with the adoption of the ISO 20022 XML message format for OTC derivatives reporting. This will be set out in the Reporting Guidelines.
MAS will adopt the ISO 20022 XML message format at the same time as the implementation of the revised First Schedule of the SF(RDC)R in October 2024.