- The UTI is more than just a regulatory and compliance requirement; it’s essential for transparency, efficiency, and innovation.
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As more jurisdictions move to a shortened settlement cycle, industry-wide collaboration is crucial for the successful adoption of UTIs, which can provide a common reference, particularly for fragmented markets like the EU.
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DTCC offers clients flexibility for viewing UTIs or fully integrating, without any additional cost.
The adoption of the UTI (Unique Transaction Identifier) has become increasingly important for enhancing transparency and operational efficiency for the processing of fixed income and equity transactions. At the recent ISITC virtual event, Making the Case for UTI Adoption, John Heliotis, DTCC Director, Product Management, alongside several industry experts, provided insights on the benefits and costs of UTI adoption.
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Driving UTI Adoption
The UTI is more than just a regulatory requirement, it is a long-term enabler of market efficiency and innovation. As Europe and the United Kingdom follow North America in shortening the settlement cycle for equities, UTIs can provide a common reference for both sides of the transaction.
Across the trade lifecycle, UTIs provide a path for post-trade efficiency, particularly with shortened settlement cycles. But transaction visibility is a collective action problem, and for UTIs to best work, industry-wide collaboration is needed. While firms are beginning to tackle UTI adoption, more work is needed to discuss gaps in protocols and market practices.
DTCC has been a long-time supporter of UTI adoption. Heliotis said that through standardization comes efficiency, but without standards, there is additional research, friction, duplicative steps and a general lack of efficiency. “DTCC has been utilizing UTI for several years in CTM. As we embark on our massive modernization efforts, UTIs will be incorporated. It’s optional now, but in the future it may become mandatory.”
The Benefits of Adopting UTIs
Using UTIs can help firms gain efficiency, transparency and enable them to create new tools to meet future market requirements. At the same time, the risks of not utilizing UTIs include failed settlement, penalties, and increased post-trade settlement costs. From both the buy and sell side, the more firms use UTIs, the greater its benefits as a common identifier across the industry.
In addition to post-trade efficiency, UTIs also provide rich data and visibility to inform how systems are working and help with decision-making. One panelist noted that the optimal benefit of UTI is how it matches both sides of a trade, a shift from the implicit approach utilized today. Looking ahead, this utilization of UTIs is foundational to a more automated future state operating model, and the ability to have machine-to-machine collaboration. But industry-wide adoption is necessary for the maximum benefits of UTI.
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How DTCC Is Enabling UTI
CTM clients can opt in to use UTI, and the value will permeate through to settlement. By leveraging UTIs with LEI embedded within, clients can view the transaction flow from order processing all the way to settlement. As a standard, it will reduce churn in the industry, especially with accelerated settlement cycles. Heliotis added that as firms modernize, it may be a good time to think about how UTIs will be used in applications.
Clients can begin using UTIs at no cost, and the system has been developed with flexibility, allowing firms to integrate at their own pace. Heliotis noted that CTM clients can begin utilizing UTIs right now by simply requesting the UTI value be turned on, with no additional cost. UTIs are also on DTCC’s SWIFT gateway, and clients can apply by recipient.
The Future of UTI
More than just solving today’s problems, UTIs can unlock value and be a building block for future market infrastructure, including digital assets, real-time settlement, T0, tokenization, and smart contracts. UTIs bring certainty to transactions in today’s world and truth in tomorrow’s real-time environment.
Clients are urged to start planning how to leverage UTIs now, no matter what platform is being used. The ability to search by UTI to view a transaction throughout its trade lifecycle is very powerful, especially as accelerated settlement timelines reduce time available to resolve exceptions. DTCC will be incorporating UTIs across all ITP applications, and clients will need to update/manage systems to accommodate.
Conversely, by not acting, firms won’t be able to advance or build to scale and will be limited to labor-intensive processes that lead to more exceptions, reconciliations, and breaks. UTIs are about more than just gaining efficiencies today — firms can avoid bigger operational headaches by building a future-ready system.
Heliotis concluded, “The ability to improve matching and settlement rates is crucial, especially with the recent unprecedented volume. The ability to resolve quickly will continue to be more critical in the future, leveraging one single point of identification that everyone can look through.”
Visit DTCC Learning for more information on how to consume or view UTIs.