Numbering Agency Calls for Experts

The agency that generates codes to identify over-the-counter (OTC) derivatives is calling for new experts to join its technical advisory committee (TAC).

The Derivatives Service Bureau (DSB) is looking for applications from technologists with expertise in cloud-based technology and infrastructure, workflows, and cybersecurity. The TAC’s work in its new two-year term, which begins in October, will focus on the integration of the Unique Product Identifier (UPI), after the DSB’s designation last year as the sole service provider for the UPI. The TAC works alongside the DSB’s Product Committee to advise the agency.

“As part of our preparation and implementation [as a service provider], which includes stakeholder engagement, how we move forward with the UPI will be a core element of the role of the TAC and the Product Committee in the respective functions that they provide, in their advisory capacity to the DSB,” says Emma Kalliomaki, managing director at the Association of National Numbering Agencies (ANNA), of which the DSB is a subsidiary.

The DSB is the numbering agency that was developed (somewhat controversially at the time) to issue International Securities Identification Numbers (Isins), which identify OTC derivative trades for regulatory reporting in regimes such as the Markets in Financial Instruments Directive. The DSB also issues other ISO-standard codes for financial instruments, including the Classification of Financial Instruments (CFI) code. The Financial Stability Board (FSB) last year also designated the DSB as the service provider for the UPI system for OTC derivative transactions, and operator of the UPI reference data library, a major step in completing the governance framework for the UPI.

The UPI, which identifies products in OTC derivative transactions, will, like the Isin, be a key identifier in regulatory reporting. The UPI is being developed by the FSB and global standards bodies to harmonize the data elements that are reported to trade repositories; supervisors envisage they will be used to identify products in aggregate reference data for more transparency into OTC markets. The FSB says individual jurisdictions should implement the UPI in their own regulations by Q3 2022.

Because the UPI is a global standard, Kalliomaki says the DSB is especially hoping to attract TAC applicants from Asia, South America, Africa, and the Middle East, and from a wide variety of financial institutions.

“Given that UPI implementation and adoption is going to be on a global scale, having direct interaction from stakeholders within those markets will be extremely useful for how we move forward on UPI matters,” Kalliomaki says.

The TAC will advise the DSB on how it might integrate the UPI to serve the needs not only of existing customers, but also communities of potential new users as the service becomes global.

“The TAC’s focus will be on technological aspects: we are looking at infrastructure and workflows, and that includes cybersecurity, which is obviously very important for financial firms, and has become even more important in pandemic times due to increased resilience concerns and utilization of security around critical infrastructure,” Kalliomaki says.

The new TAC will continue the work of a subcommittee that looked at a strategic, high-level viewpoint for UPI integration. As part of its work, the subcommittee considered which workflows will be needed, and how to adapt current workflows for the other codes the DSB generates to support UPI issuance. That committee then made some recommendations in a consultation, and passed questions on. The TAC is now looking to attract practitioners who can advise on the nitty-gritty of these workflows, says Malavika Solanki, member of the DSB management team.

“We are looking for practitioners who are familiar with enterprise-level workflows to support data management. It’s important that they be enterprise-level: as data takes an ever more central role in users’ institutions, people with an enterprise view are able to consider the different aspects and challenges at any given organization, and think about how the DSB should be integrating with them,” Solanki says.

Users of the DSB already come to the agency to be issued identifiers like Isins and CFIs. They may need the UPI on a standalone basis, or as part of other datasets, along with these other codes.

“So when the TAC was thinking about workflows, it was thinking around those pieces primarily: How should those be supported, how should those be streamlined, how should those users be catered for?” Solanki says.

The committee will also be addressing issues that came out of the DSB’s annual industry consultation, looking at how existing infrastructure could be adapted to cater for a global user community.

“So the TAC’s initial focus has been around workflows, and going forward that will remain part of it, but they are also going to be looking at cybersecurity and cloud provision-related items as well,” Solanki says.

Solanki says that the DSB is considering if it will need a multi-cloud strategy to give it more coverage in case of potential losses. The bureau is also working to improve its cybersecurity profile, as it moves towards meeting the ISO27001 standard for information security.

UPI Hierarchies

The basis for the DSB’s application to be UPI service provider leveraged the work and industry engagement ANNA had already done on preparing to be the OTC ISIN issuer, Kalliomaki says. The DSB had planned, even before it received the designation, to create a data hierarchy that could leverage the Isin, the UPI, and the CFI, after a regulatory study found that a UPI that included a well-articulated and precise classification hierarchy would benefit the financial industry and regulators as it would make data aggregation and analysis easier.

“Given that the OTC Isin was being launched, our design had always factored in this consideration, which had been driven by the industry, around having a hierarchy; introducing UPI into our data model was always part of the plan, whether we were designated as the service provider or not,” Kalliomaki says.

“That work with the FSB is currently under way, and we are also starting to increase awareness and visibility of the UPI within the industry” ahead of Q3 2022, she adds.

Apart from its work on the UPI, the TAC has also been advising the DSB on its response to remote working during Covid-19, initially implementing a change freeze. Under the change freeze, no non-essential changes are made to the DSB’s services, and critical changes are subject to additional controls. 

“The TAC has been key recently for how the DSB approached change management with regard to the pandemic. Following engagement with the TAC, the DSB decided in March that we would put in a change freeze to allow our users stability and security in our service provision,” Kalliomaki says. The DSB is still in a heightened awareness period that will run until the end of September, when it will be evaluated, she adds.

The TAC currently has 27 members, and is looking to add a further 10 seats. Existing members, who include representatives from systematic internalizers and trading venues, are expected to renew their positions. Applications to join the TAC can be made via email to the DSB. The deadline for applications is September 4.