The European Securities and Markets Authority (ESMA)’s Digital Ledger Technology (DLT) Pilot regime is applicable from March 23, 2023, according to an update shared with CI.
The Pilot reportedly “allows some exemptions from the EU’s MiFIR and CSDR regimes, making it easier for market participants to trial DLT when trading and settling financial instruments.”
The Pilot also “helps bring pre- and post-trade transparency and market abuse monitoring to DLT-based securities.”
As part of the Pilot, ESMA recommends “the International Standards Organisation (ISO) standard 24165 Digital Token Identifier (DTI) codes, issued by the DTI Foundation (DTIF) as a compensatory measure.”
Following the recommendation of the DTI, ESMA has also “issued a Q&A on the DLT Pilot Regime.”
On 3 February 2023, ESMA “updated this Q&A (first published on 16 December 2022), recommending that trading venues, investment firms and approved publication arrangements (APAs) complement the ISIN by including the Digital Token Identifier (DTI) when publishing post-trade information under Table 3 of Annex I of RTS 1 (equity and equity-like instruments), and Table 2 of Annex II of RTS 2 (for non-equities).”
DTIF and the Association of National Numbering Agencies (ANNA), ISO Registration Authority for ISO 6166 International Securities Identification Numbers (ISINs), have been running “a joint task force set up to explore the synergies between DTIs and ISINs.”
The task force has “recommended close cooperation between the registration authorities and has been working on identifying security tokens with existing ISINs so that these can be issued DTIs. So far, over fifty such tokens have been identified, verified and added to the DTI registry.”
The task force will “continue its work to ensure that participants in the DLT Pilot can meet ESMA’s recommendations.”
Sassan Danesh, CEO of Etrading Software, said:
“The DTI standard is critical to help industry know what they are dealing with. They continue to adopt the standard to help build increased transparency and clarity in the market. ESMA’s pilot today signals the importance given to pre- and post-trade transparency and protecting industry against market abuse.”
Stephan Dreyer, Managing Director of ANNA, said:
“Working with the DTIF, ANNA is building interoperability between the ISIN and DTI, harmonising standards in this space. The ISIN standard (ISO 6166) will continue to provide unique instrument identification as it has for the past forty years and incorporate new assets, including digital assets.”
As noted the update, the Digital Token Identifier Foundation (DTIF) is “a non-profit division of Etrading Software (ETS), a financial technology firm with a mission of solving market-wide problems by building market infrastructures for the new digital economy.”
DTIF’s mission is “to provide the golden source reference data for the unique identification of digital tokens based on ISO’s new standard for digital assets, ISO 24165.”
The DTI Foundation has already “issued ISO identification codes for over a thousand of the most commonly traded digital assets, with more codes being added each day.”
All commonly traded digital assets can been “assigned ISO-standard DTI codes.”
As mentioned in the announcement, Etrading Software is “the independent, global provider of technology-led solutions designed to assist financial institutions and industry initiatives to address the highly complex and constantly evolving market and regulatory challenges.”
Etrading Software “designs, builds and operates technology solutions for the front office for fixed income OTC markets, allowing clients to keep full governance and control using transparent and vendor-neutral solutions.”
Etrading Software has “a European and Asian presence, with headquarters in London.”