OTC Taxonomies

The OTC Taxonomies provide a classification for each of the derivative asset classes, with a primary goal to facilitate regulatory reporting. The Taxonomies will be used to classify trades reported to the asset-class specific Swap Data Repositories. The industry has produced taxonomies for each of the asset classes: credit, interest rates, commodities, equities and FX, which we expect to evolve over time. The final taxonomies have been integrated in the FpML data standard to facilitate the reporting process. Coordination with other international standards such as ISO to align with the ISDA taxonomies is ongoing.

As data harmonization moves to the forefront, and various international bodies call for global data aggregation, many market participants felt it an optimal time to refine and update ISDA OTC Derivatives Products Taxonomy to version 2.0 (“Taxonomy v2.0”). The original version of the Taxonomy has been in use for cross-jurisdictional reporting for Credit, Rates, Equities, Commodities and FX since 2012. The update to Taxonomy v2.0 was achieved through the collaboration of industry working groups, asset class experts, and steering committees. It incorporates regulator input, suggestions for additions, reclassifications, and granularity from the industry, as well as analysis of historical data to determine where changes were needed to improve consistency. The industry is committed to implement the updated version if there is regulatory endorsement to use Taxonomy v2.0 for trade reporting. Implementation timelines are still to be determined and are dependent on this regulatory endorsement.

Unique Product Identifier (UPI)

UPI is defined by the CFTC (17 CFR part 43) as: “Unique product identifier means a unique identification of a particular level of the taxonomy of the asset class or sub-asset class in question.” The industry made recommendations to the CFTC Technology Advisory Committee (TAC) on the development of UPIs for OTC derivatives and requested further input on the level of granularity of the UPI. We expect discussions to continue after the start of the regulatory reporting.

Resources:

• ISDA OTC Taxonomies web page: https://www.isda.org/2019/09/04/isda-taxonomy-2-0-finalized/