I support the Commission’s issuance of an Order designating specific swaps product identifiers pursuant to part 45 of the Commission’s regulations.  I would like to recognize the staff of the Division of Market Oversight, Division of Data, and the Office of International Affairs, for their work on this effort. 

In 2009, the Group of Twenty Finance Ministers and Central Bank Governors (G20) made a commitment to report over-the-counter (OTC) swap transactions to trade repositories to prevent market abuse and mitigate systemic risk in response to the global financial crisis, where a lack of transparency in the OTC swaps markets was identified as one of the causes of the 2008 financial crisis.  In October 2012, the CFTC was the first global regulator to implement requirements for the reporting of OTC swaps to a swap data repository.[1] 

Following a period of international coordination, in September 2014 the Financial Stability Board (FSB) recommended the creation of a unique product identifier (UPI) in swaps transactions reporting to ensure that OTC derivatives can be effectively aggregated.[2]  At the request of FSB, the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) developed global technical guidance on UPIs in September 2017, while the FSB defined governance arrangements for a UPI System.[3]  Since October 2020, the Regulatory Oversight Committee (ROC) has been the International Governance Body for global derivatives identifiers and data elements, including the UPI.[4] 

Market participants, service providers, and financial market infrastructures have expended tremendous resources, time, and effort to implement CFTC swap data reporting requirements, as well as those of other regulators around the world. Frequently, these reporting requirements have presented significant operational challenges due to the lack of clarity and standardization in data fields and other elements.  Sometimes, there has been an outright conflict in legal and other requirements across jurisdictions, or other issues resulting in duplicative or inconsistent reporting. 

While I am pleased the CFTC is taking this important step to improve swaps data for meaningful, timely analysis, the CFTC’s work is not done.  This week, the CFTC hosted the first Global Markets Advisory Committee (GMAC) meeting under my sponsorship.  During this meeting, GMAC members raised important issues concerning the implementation of UPIs by the CFTC that still need to be considered, including the possibility of differences between the underlying data values and those derived from UPIs, different UPIs reported by two counterparties to the same trade, and differences in International Organization for Standardization (ISO) messages and accepted values for the same critical data element fields.[5] 

Since the 2008 financial crisis, regulators have been working to use standardized transaction data to monitor systemic risk.  Standard identifiers like the UPI will help identify and aggregate financial transaction data.  While the Commission’s Order is a good step in the right direction, the CFTC must continue its work to ensure the improvement of data quality and data utility in its markets by partnering with market participants, service providers, and financial market infrastructures to achieve the goals of the G20.  In particular, the work of the ROC should be supported for the consistent implementation of CPMI-IOSCO recommendations. 

In doing so, the CFTC should work with international standard setters and other jurisdictions to consider how to amalgamate data used by supervisory authorities to enhance the supervision and oversight of global markets to improve the monitoring of systemic risk.  Recent events, market disruptions, and losses have shown international policymakers that our work is not done, and we should still strive to achieve greater transparency.

[1] Real-Time Public Reporting of Swap Transaction Data, 77 FR 1181 (Jan. 9, 2012).

[2] Financial Stability Board, Feasibility study on approaches to aggregate OTC derivatives data (Sept. 19, 2014), at p. 2, available at https://www.fsb.org/wp-content/uploads/r_140919.pdf.

[3] CPMI-IOSCO (2017), Technical Guidance – Harmonization of the Unique Product Identifier, available at https://www.bis.org/cpmi/publ/d169.pdf.

[4] Regulatory Oversight Committee, ROC Becomes the International Governance Body for the Unique Transaction Identifier, Unique Product Identifier, and Critical Data Elements, (Oct. 1, 2020) available at https://www.leiroc.org/pressrels/roc_20201001-2.pdf.

[5] See Presentations of CFTC Global Markets Advisory Committee (GMAC) members Chris Childs, DTCC, and Steven Kennedy, ISDA, before the CFTC’s GMAC meeting (Feb. 13, 2023), available at https://www.cftc.gov/PressRoom/Events/opaeventgmac021323 (Additional Documents).