Traders and operations managers handling cryptocurrencies and other digital assets could soon find themselves using new identification codes issued by Etrading Software, pending approval by the International Organization for Standardization (ISO), the standards-setting body.
The London-based Etrading Software has beaten the duo of Bloomberg and Kaiko in the bidding process to be named as the registration authority for issuing identification codes for digital tokens after winning the green light from an ISO subcommittee. Jim Northey, chairman of the ISO TC68 committee whose TC68/SC8 subcommittee is comprised of 28 national standards groups, and Etrading Software confirmed to FinOps Report that the subcommittee had selected Etrading Software. Neither he nor Etrading Software would elaborate on the rationale behind that decision or by how large a margin Etrading Software won. A supermajority or 2/3rd vote from the subcommittee was required for the winning proposal to be passed to ISO for acceptance.
As previously reported by FinOps Report, the London-based Etrading Software and the team of Bloomberg in New York with the Paris-headquartered Kaiko were the only contenders for the role of DTI RA (July 31, 2020: Etrading Software; Bloomberg-Kaiko Vie for Crypto ID Authority). As FinOps Report went to press, the ISO had not made a public announcement as to whether it had accepted its subcommittee’s recommendation which is required for the digital token registration identification authority (DTI RA) to be launched. However, that acceptance is considered to be a formality.
The new DTI RA is expected to go live as early as July 2021 and will operate on a cost-recovery basis. In a statement to FinOps Report, Etrading Software says that the new nine-digit alphanumeric ID codes it issues for digital tokens would exclude vowels, lowercase letters, and 0 as the first digit. The website for the DTI RA would support assigning DTIs through a sequence of web pages that will guide the user through the process and ensure that all the required data elements are captured at the start of the DTI application process.
The new ID codes would be used to track financial transactions of the same token, which would be unique identified based on a series of data elements. The codes, which will apply to cryptocurrencies as well as security and payment tokens, are meant to eliminate any confusion or mistakes over whether traders and post-trade processing departments are talking about the same instrument when trading or processing transactions. Although traditional securities– equities, bonds and derivatives — are known through single local or international securities identification codes, that’s not the case for digital tokens. Some digital tokens can bear the same short code representing different asset, while different codes can represent the same cryptocurrency. Case in point: Bitcoin can be identified as BTC or XBT.
In their separate proposals to become the DTI RA, eTrading Software and the team of Bloomberg and Kaiko had highlighted their abilities to rely on their existing data services which would reduce their ramp-up costs and time to market for issuing DTIs. However, eTrading Software’s track record in helping to successfully launch the Derivatives Service Bureau to issue international securities identification codes (ISINs) for OTC derivatives could have been the key differentiator. In its statement to FinOps Report, Etrading Software reiterated that as the DTI RA it will leverage its technology platform used as the engine issuing ISINs for OTC derivatives on behalf of the London-based DSB. The subsidiary of the Association of National Numbering Agencies, the trade group representing national numbering agencies, went live right before the January 2018 start of the reporting requirements for the second incarnation of Europe’s Markets in Financial Instruments Directive.
In their joint proposal, Bloomberg and Kaiko cited Bloomberg’s issuance of Financial Instrument Global Identifiers (FIGIs) and legal entity identifiers (LEIs) and Kaiko’s collection of market data on cryptocurrencies since 2014 as their respective capabilities. Initially known as the Bloomberg Global Identifier, the FIGI has been adopted as a global identification standard by the Object Management Group, a Needham, Mass. headquartered body known for the development of technology standards, and has won support from some major international exchanges and regulators. Kaiko’s raw data. order books, and aggregated data cover over 10,000 currency pairs over 80 exchanges with new markets added daily. Historical data can be delivered via csv files through the firm’s datafeed or REST API. Kaiko also provides real-time trade order book and aggregated data through an REST API or live data through a WebSocket.
In its statement to FinOps Report, eTrading Software says that it expects to issue 384 ID codes its first year of operation, followed by 1275 in its second year, and 3535 in its third year. It will ramp up production to 23,550 ID codes in the fourth year and 67824 in the fifth year. Etrading Software reiterated its stance highlighted in its proposal for the job of DTI RA that if there were sufficient interest, it would create a federated system for one or more national registration agencies to issue the DTIs. For the initial go-live date for the DTI RA, eTrading Software also says it will establish a Products Advisory Committee (PAC) based on a cross-section of industry participants, but wouldn’t disclose any candidates for membership. Etrading Software also wouldn’t specify fees for issuing the DTIs, but says there would be no charge to access ID codes over the Internet and any charge for issuing ID codes through the API would be similar to the DSB’s approach. The DSB relies on a tiered-fee model with the heaviest users paying the most. That fee model has undergone some change since the DSB’s launch after trading venues complained they were being overcharged. Issuers, cryptoexchanges, digital asset custodians, regulators, and investors can apply for new DTIs.
Should ISO officially name Etrading Software as the DTI RA as is widely expected, its decision would mark the second time Bloomberg has lost out in having its FIGIs win ISO ‘s blessings. In 2017 Bloomberg lost out on nabbing ISO’s approval for its FIGIs to be considered a numbering standard after requesting that the US Accredited Standards X9 Committee, a participating member of the TC68 committee ask the TC68 committee to withdraw the ballot from voting.
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