ISINs-Plus: Will ANNA’s New Data Offering Be Embraced?

When it comes to codes to identify and describe millions of financial instruments, the world certainly has no shortage.

ISINs, LEIs, MICs and now FIGIs are just a handful of the acronyms used.

But tracking down all the necessary codes and linking them together to use in multiple applications, let alone ensuring their accuracy, can be a cumbersome and expensive task for front, middle and back-office experts at buy and sell-side firms across the globe.  So can verifying that the background reference data about the financial instruments and issuers is correct and current.

A new plan for a comprehensive package of instrument-related identifiers linked to International Securities Identification Numbers (ISINs),  just unveiled by the Association of National Numbering Agencies (ANNA), aims to ease the operational costs and burdens for financial firms. It is also may help to accomplish one more task — preserving  the ISIN’s dominance as the must-use code for cross-border trading and post-trade processing of securities transactions in the face of a new wannabe rival.

Naturally, as the offering is still in its infancy, it remains to be seen just how well it will be embraced by financial firms which have historically relied heavily on multiple data vendors for the same information. But at the very least the new datafeed’s release is opportune. Although the national numbering agencies (NNAs) that make up ANNA’s membership have been working for the past two years with the ANNA Service Bureau on the the enhanced ISIN file’project, its launch happens to coincide with an intense marketing campaign currently being waged by Bloomberg to make its proprietary instrument identifier code called FIGI a household name.

ANNA and Bloomberg have publicly denied they are in competition, yet the mere fact that Bloomberg has designed the Financial Instrument Global Identifier (FIGI) as a twelve-digit alphanumeric code, exactly the same size as the ISIN, provides some evidence that Bloomberg is trying to usurp ISINs in favor of FIGIs as the international standard. So has Bloomberg’s success in winning the endorsement of the Object Management Group, a US standards organization with data architects among its members. The data giant has also secured a seat on the influential US X9 securities standards organization and is courting the International Organization  for Standardization (ISO) as well as trade associations like the International Securities Association for Institutional Trade Communication (ISITC) for recognition of FIGI.

“Our goal [in creating the expanded ISIN files] was to fulfill the needs of market players who asked for additional information on the codes and its issuer,” says Daniel Kuhnel, a director at international securities depository Euroclear and chairman of ANNA. The ISIN, like other standard identifiers such as Classification of Financial Instruments (CFI), Market Identifier Code (MIC) and Legal Entity Identifier (LEI) were developed by industry working groups under the auspices of the ISO. ANNA is the registration authority for ISINs and CFIs, which includes oversight of the code-issuing activities of its membership.

How it Works

Local numbering agencies are providing the data from their own nations and delivering the expanded ISIN files to the ANNA Service Bureau (ASB). As those numbering agencies are just one step removed from issuers and do their own data verification it stands to reason that the NNAs are responsible for the accuracy of the information they provide the ASB.  The ASB maintains the centralized database and works with the numbering agencies to resolve any problems with the data.

The ASB, a division of ANNA operated by North America’s numbering agency CUSIP Global Services and Switzerland’s numbering agency SIX Financial Information, was launched in 2001 to maintain a consolidated database of the ISIN and CFI codes and descriptive information issued for more than 120 countries across the globe. The plans for the expanded ISIN file structure were formalized at the time ANNA’s contract with the two ASB operators was renewed two years ago.

As the new database structure just went live in mid-November, only some of the ANNA member numbering agencies are sending the enhanced ISIN files from their countries. Kuhnel would not disclose how many or which ones, but says that he expects the global coverage of enhanced ISIN files to reach “critical mass” in about six months.

Just what does the enhanced ISIN file include? A lot more information and additional codes needed to understand the attributes of the securities instrument in question, including its issuer, the exchanges on which it is listed and traded, the depositories used by the issuer, as well as the lead manager of the initial offering and, in the case of a fund instrument, the identity of the fund manager. Additional information such as the type of financial instrument, the country of issue and the currency in which it is denominated are among the codes provided. Bottom line: the data fields in the enhanced ISIN file have increased to about 42 from the previous 23.

Where available, legal entity identifiers are provided for the issuer, depositories, lead manager and fund manager, as well as the headquarters address of the issuer. Kuhnel says that the project leverages the LEI-issuing activities of a number of a number of ANNA-member numbering agencies. Out of 30 institutions already approved to issue LEIs, 14 are NNAs, include the London Stock Exchange in the UK, WMDaten in Germany, the National Settlement Depository in Russia. In nations where LEIs are issued by institutions that are not numbering agencies, ANNA will count on member numbering agencies to collect the information.

Selling consolidated global instrument data is nothing new for the ANNA Service Bureau, which has been serving large banks and data vendors with its legacy datafeed of ISINs and CFIs issued by the numbering agencies. The old feed will continue to be offered, but ANNA is hoping that the new file will attract financial firms who don’t want to track down and operationally interconnect the additional information from multiple sources such as national numbering agencies, data vendors, or in the case of MICs, the La Hulpe, Belgium-headquartered network provider SWIFT.

ANNA promotes the enhanced ISIN file as aiding in straight-through processing, especially in the post-trade realm. Likewise, the more information a firm is able to store and easily access about a security it wants to trade and its issuer the more likely it is to calculate its market, credit and liquidity risk correctly. The same data elements are necessary to meet reporting requirements to regulators tracking systemic risk.

The Specialists

Who does the work of gathering the codes and underlying information at financial firms? It all depends. Most large financial organizations rely on data procurement specialists as the dealmakers to negotiate contracts with external data providers and other information providers based on the needs of data consumers in various business lines.

Incoming data is then likely to pass through a data management or analysis unit which is responsible for ensuring the accuracy of the data, resolving inconsistencies and funneling data to applications or work groups that use it. Data integration specialists have to figure out how to link or interconnect important data elements with each other, such as the attributes of a financial instrument with its issuer and guarantor. Although the trend to centralize procurement and data management is well-established, some organizations use no middle layer of centralized procurement and data specialists.  Instead, each business line — or data-consuming function such as trading — procures and manages its own data.

Regardless of the firm’s data management and governance structure, plenty of time and money goes into getting data to where it’s needed. How much depends on the number of data vendors used, the number and types of business lines involved, the amount of work necessary to cleanse the data and the amount of work needed for data integration. In some cases, the data comes with redistribution restrictions that require additional payment if the data is disseminated beyond the institution’s walls.

Two data procurement directors at large global broker-dealers and banks in New York tell FinOps Report that their respective firms spend “several million dollars” a year on licensing fees alone. “Although we have slowed down the annual increase in the data spending by reducing the number of data feeds and renegotiating contracts with vendors, data continues to be one of the top five items in our operating budgets,” explains one data procurement director.

Will this new enhanced ISIN file have any impact on the apparent competition between the ISIN and Bloomberg’s FIGI for dominant status as the global instrument identifier? At this point, it’s difficult to know what inroads FIGI is making among users, other than those already employing Bloomberg terminals. Both ANNA and Bloomberg are adamant that the two identifiers are not interchangeable.

Hesitant Reaction

The data procurement directors who spoke with FinOps were reticent to compare the new ISIN file with FIGIs, but at first glance agreed that ANNA’s new enhanced ISIN file certainly offers far more information than the FIGI on a standalone basis — not only on the security itself, but also its issuer. Yet another critical selling point: the structure of the enhanced ISIN file links all the information back to the financial instrument.

Based on Bloomberg’s marketing, the main benefit of FIGI that the giant data vendor is promoting is the linkage of the security to the place where a trade occurs which the firm itself says was one of the reasons for the FIGI’s creation. The ISIN alone lacks that capability until it is linked with a MIC code for the trading venue. However, the FIGI’s advantage could be limited. It may help with transaction processing, but not necessarily with maintaining complete records of instruments, issuers and other factors. Or so says ANNA.

Yet another benefit of the new ISIN file: the linkage of the ISIN with its related data provides financial firms with a head start in complying with potential regulatory requirement to tie securities identifiers with LEIs, according to Kuhnel, who notes that the adoption of the LEI in the G20’s reform agenda is one such area. Other examples he cites of industry mandates that may be assisted by the enhanced ISIN files are MiFID, EMIR, the US Dodd Frank Wall Street Reform Act and Europe’s two-day settlement cycle

However, the ANNA Service Bureau is charging a licensing fee for its enhanced ISIN file. Kunhel says that the fee for the new ISIN file will be identical as that for the more limited existing ISIN file, but he was not able to provide a specific annual price-range or even average pricetag on the grounds it depends on how the financial firm uses and distributes the data. Bloomberg is giving away its FIGIs for free, but without complete underlying information. FIGIs must also be deconstructed to use in place of ISINs requiring additional integration work for those not using Bloomberg terminals, data integration specialists tell FinOps. Officials at Bloomberg were unavailable for comment at press time.

Two data procurement specialists who spoke with FinOps say that unless they were current customers of the ANNA Service Bureau’s legacy ISIN datafeed they would probably prefer to obtain the enhanced ISIN file through their data vendors and not the ANNA Service Bureau, which is marketing the new file.  “We wouldn’t want to be negotiating a new commercial licensing contract with another data vendor unless we had to,” says one data procurement director at a large investment bank. His stance was shared by data analysts at two US fund management firms, who also serve as the data procurement directors.

The apparent hesitancy of some financial firms to jump on the enhanced ISIN bandwagon raises the question of whether ANNA will be successful in expanding the customer base beyond the large global banks and major data vendors that are currently subscribers to the ASB’s ISIN feed. “We envision stand-alone fund managers, broker-dealers and other financial institutions to be interested,” says Kuhnel, who declined to identify any of the legacy users .

Those that hope to obtain the data through data vendors they already use raise a second question. Will the data vendors themselves take the new enhanced ISIN files? Given the expanded value at the same price, there seems little reason not to do so. Even if they do subscribe to the new datafeed, there is no guarantee they will pass through the real value, as ANNA promotes it, of the full linkage of the information to the relevant instrument, or how they will charge for the enhanced ISIN files. A spokesman for Thomson Reuters in New York would not confirm whether his firm was licensing the legacy ISIN file and would only say it is evaluating the new offering.

Only time will tell how successful ANNA will be with its new initiative. With most of the ANNA membership of national numbering agencies still in preparations to contribute enhanced ISIN files, the project has a way to go before it reaches full value. Data procurement and data management specialists should start thinking now about the choices they  have, their costs and their benefits.