Monday, June 24, 2024

ESMA’s DLT Pilot Regime Goes Live as Over 50 Security Tokens Now Given DTI Identifiers

The European Securities and Markets Authority (ESMA)’s Digital Ledger Technology (DLTPilot regime is applicable from today. The Pilot 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.”

For more information, please visit DTI, here.

For more information on the ESMA decision, please visit ESMA here

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