Dual-sided reporting has been adapted by many jurisdictions.
UTI matching is now a basic requirement for market participants and needs to be achieved at low cost and minimal fuss for sell side and buy side reporting entities of all sizes.
The introduction of trade reporting and the wider net cast by dual-sided reporting, has contributed to a dramatic expansion of industry compliance costs. Reporting entities have been unable to efficiently pair UTIs with their counterparties and pairing rates are being reported as low as 60% .
Regulators remain firm on the implementation of the dual sided system and in the absence of accurate UTI matching, participants will be open to higher regulatory spend due to more manual processes and potential exposure to punitive measures for non-compliance. For Banks, Fund Managers, Treasuries and other market participants the basic requirement of accurate UTI pairing needs to be achieved at low cost.
To complicate matters, the nature of post-Dodd Frank / SFTR reporting regimes has added substantial technical breadth to the pool of ‘market participants.’ Consider that a multi-national bank spending hundreds of millions on technology needs the same UTI as a non-financial market participant using spreadsheets and paper confirmations.
Sharing and pairing of UTIs remains one of the biggest challenges to the financial industries , already concerned about the complexity of dual sided reporting.
The solution is Swap-Id - a secure, cost effective and flexible UTI matching system; available now.
UTI Matching: Efficient & Secure Matching for Trade Reporting
The Swap-id matching engine is a market leading system that matches UTIs and increases reporting accuracy in regulated environments. UTI matching prior to reporting ensures that trading parties have the same UTI, regardless of construction or origin.
The technology is secure, simple and cost-efficient. The system has been designed to suit both sophisticated users via their trading systems and smaller firms via spreadsheet connection or matching through a web portal.
Flexibility built into our UTI matching system allows market participants to use existing agreements and delegation or to outsource the generation of the UTI.
Contribute or Consume
By deploying a "contribute or consume" model, all these different parties are enabled for rapid, accurate and low cost communication of UTIs. Market participants with larger trade flows can automate matching by submitting limited trade data to the API, which will then match with trades submitted by the counterparty or be queued for the counterparty to pick up later.
On the sell side, reporting entities have many clients and the UTIs are made available securely to each client separately. Similarly, buy side clients who need the flexibility to have UTIs from multiple banks or brokers ‘consumable’ from one location are assured compliant reporting.
Effective communication and matching (pairing & sharing) will work with, but does not necessitate harmonisation of UTIs. Participants can send their own UTIs, receive their counterparty’s UTI, or both can agree to accept one constructed within the system.
An Identifier of 52 alphanumeric characters (plus 4 possible special characters except at the start and the end) has a 183 x 1080 combinations. Random construction of a UTI in this way leaves no possibility of ‘collision’ or duplication. Conversely similar probabilities apply to the success of UTIs constructed remotely on a "rules" basis.
Therefore, effective communication of Unique Transaction Identifiers is essential regardless of their construction.
Case 1: Sell Side Bank
Large volumes, high level of technology. Many clients. Existing UTI generation.
This market participant connects to the API from their trading system and publishes UTIs for matching with their counterparties. Simple trade details will allow their counterparties to match UTIs and pair in a timely manner. Reconciliation and matching confirmation are available via various API or portal methods.
Case 2: Buy Side (Active) - Fund managers, hedge funds, active treasuries.
Multiple trades, technology proficient, many counterparties.
These parties connect directly from their trading system or use the Swap-Id spreadsheet to connect and either contribute and consume or just consume UTIs from the matching engine. The system is secure – and, using the Swap-Id spreadsheet, connection takes minutes.
Case 3 Buy Side (Small) - Small funds, treasuries, insurance
Few trades, technology limited. Few counterparties.
Connect immediately to the web portal to confirm, consume and match UTIs, or using the Swap-Id spreadsheet, connect in minutes to consume and match identifiers and integrate with your existing spreadsheet based reporting tools.
Low Risk Implementation
As well as being efficient and flexible enough to fulfil multi-industry needs, Swap-id is data-safe and extremely secure.
Swap-id has protocols to ensure that only the minimum data required is sent to the API, and economic data is limited or non-existent in the information. For example, if a bank trades once with a client in a day, then the suggestion is to contribute only counterparty and trade date. Swap-Id will best match on this data alone.
The API is connected via an SSL connection. Authentication is via username and password and connection involves a bearer token requested at the time. Further standard security measures such as IP filtering make the system ‘point to point’ and clients must ‘connect-in’ to obtain information and no data is ‘pushed out’.
Benefits to Industry
Both the banking and finance industries, together with corporate treasuries will benefit from efficient, timely and accurate reporting. Low capex and opex will assist in increasing reporting efficiencies, helping to keeping the cost of compliance to a minimum.
Reporting and compliance are not profit centres and the required reporting threshold needs to be reached efficiently and effectively to allow business to continue transacting and profiting elsewhere. Swap-id understands this efficiency driver and will assist banks, fund managers, treasuries and other market participants in their efficiency endeavours.
For all reporting entities, increased compliance will reduce the possibility of breaches and thereby the cost of fines and further audit if exceptions are detected.
Dual-sided regulatory reporting has been implemented across a range of regimes and communicating and matching UTIs remains the main challenge. Despite plans to construct and harmonise UTIs in various ways, matching remains the industry benchmark for accurate compliance.
A low cost, secure and accurate matching engine has been produced by Swap-Id. The system resolves the challenges of connecting previously unconnected counterparties, all of whom have different technical capabilities.
The system will save market participants regulatory expenditure both in lower opex, but also by mitigation of regulatory fines or other sanctions.
Swap-id’s matching engine is a market available solution – ready today.