Editor’s Update: The ballot concerning the FIGI becoming an ISO standard has been cancelled. On July 14, FinOps Report received confirmation from Steve Stevens, executive director of X9. “Bloomberg had requested that X9 ask the TC68 committee to withdraw the ballot from voting,” he said. “The request was agreed to by the X9 and TC68 withdrew the ballot. Since the ballot was withdrawn prior to completion, it was not an official ballot.” Bloomberg declined to comment on why it made the request.
Published June 30, 2017
Data giant Bloomberg is inching closer to achieving its dream of having its FIGI identification codes recognized as a global standard on equal footing with the International Securities Identification Number (ISIN, ISO 6166).
What may be an inch now could become an important milestone next month if Bloomberg is successful. Thirty-one participating members of the TC68 committee of the International Organization for Standards (ISO) are now voting on whether to allow Bloomberg’s FIGI to follow a designated path towards becoming an ISO-accredited standard. Voting is set to end on July 18.
Financial firms rely on identifiers such as FIGIs, ISINs and others, to communicate more easily with each other about the securities they are trading and the transactions that ultimately clear and settle through the exchange of cash for securities. Identifiers are also used for regulatory and investor reporting.
The request for consideration from Bloomberg was submitted to ISO by the US Accredited Standards X9 committee, a participating member of TC68. “We believe that since FIGIs are already being used it, is only appropriate that they be reviewed by the TC68 committee,” confirms Steve Stevens, executive director of X9, the Annapolis, Maryland-based US standards setting body for the financial services industry. He insists that X9 has no vested interest in the outcome of the TC68 committee’s vote.
A spokesperson for ISO in Geneva also confirms that the TC68 committee received the working item from X9 and it was sent out for a vote on April 25. TC68 is the ISO committee overseeing standards involving the financial services industry. Its participating members are national standards organizations representing their home markets. Among the members of the X9 committee are the influential Washington, D.C. lobbying group American Bankers Association, as well as Bloomberg, Bank of America Merrill Lynch, the Commodity Futures Trading Commission, Citi, North America’s numbering agency CUSIP Global Service Bureau, the Federal Reserve Bank, JP Morgan, and the Department of the Treasury.
Bloomberg has a long way to go before the FIGI could achieve any sort of ISO accreditation. The TC68 committee requires a supermajority — at least two-thirds of votes– from participating members for a working item to be approved. In addition, five of the countries represented on the committee must agree to do nominate experts to do further work studying the FIGI. Even if the FIGI working item wins approval from the TC68 voters for further evaluation, it could still take two years before the FIGI wins any type of ISO accreditation, Stevens predicts.
The Bloomberg’s OpenFIGI website shows a three-tiered hierarchy of FIGIs, denoting market-level, country and global identifiers. It is unclear whether members of the TC68 committee are voting to evaluate Bloomberg’s FIGIs as an alternative financial identification standard to ISIN, as a new methodology for financial instrument identification, or even both. Karla McKenna, director of market practice and standards for Citi, who chairs the T68 committee declined to comment for this article.
Coexistance or Conquest?
The TC68’s voting process represents the latest salvo in Bloomberg’s battle for its FIGI to win market share over the ISIN, beyond its native function as an instrument identifier in the proprietary data structure used in Bloomberg terminals. Formerly called the Bloomberg Global ID (BBGID), the FIGI was renamed after its adoption as a global identification standard by the Object Management Group (OMG), a body known for development of technology standards. Further distancing it from Bloomberg’s ownership, the FIGI is now called the OMG FIGI. However, Bloomberg retains its position as the only entity issuing FIGIs.
Bloomberg would not comment on the TC68’s work or even confirm that voting on the FIGI as a work item was underway. However, in a statement issued this week to FinOps Report, Rich Robinson, Bloomberg’s industry relations and open symbology strategy executive, says, “The existence of one standard for one purpose does not invalidate the need for a different standard, even when it is similar, when it is for a different purpose, for use in a different context or using a different methodology.”
Robinson also insists that Bloomberg doesn’t want FIGI to replace ISINs. Instead the FIGI can complement the ISIN. “We think FIGI adds strength to the ISO 6166 standard when they are used together properly,” he says. “On the surface, two things may look like they identify the same thing, but have very different functions.”
What are those different functions? On its website, Bloomberg says. “The identifiers are used for managing the transition of hierarchical specificity as an instrument moves through the functional aspects of trading, settlement, portfolio management, asset servicing, risk management and regulatory reporting.” That list appears to include the entire lifecycle of how financial instruments are used, and wades deep into the ISIN’s established territory.
Regardless of what Robinson now says about co-existence, Bloomberg has consistently touted the FIGI as being a superior numbering standard to the ISIN. It would be no surprise if perceived ISIN shortcomings are the crux of the argument Bloomberg is presenting to members of the TC68 in the work item the X9 committee submitted to TC68.
The timing of the TC68’s voting process comes as the Derivatives Service Bureau, a subsidiary of the association of National Numbering Agencies (ANNA), is in the final stages of user-testing before it goes live in October. The DSB will issue ISINs for over-the-counter derivatives so that market players can meet the transaction reporting requirements of the second incarnation of the pan-European Markets in Financial Instruments Directive (MiFID II) that takes effect in January 2018.
Development of the DSB was triggered by last year’s announcement by the European Securities and Markets Authority (ESMA) that the ISIN would be the sole financial instrument identifier for all regulatory reporting in Europe, including for OTC instruments. To expand the coverage of ISINs to the broad range of OTC derivatives, an ISO-sponsored study group was organized to define ISIN allocation. Rather than issue ISINs for OTC derivatives through national numbering agencies, ANNA’s membership voted to create the DSB as an automated global allocation utility. The ISO SG’s work has been taken over by the DSB’s Product Committee.
ANNA is the umbrella organization for national numbering agencies and also serves as the registration authority for the ISIN, enforcing ISO-required technical and business practices. Through the industry-based ISO process, the ISIN global instrument identifier was introduced to the market more than 20 years ago,
What does ANNA have to say about Bloomberg’s attempt to win ISO accredidation for the FIGI? “As observing participants of TC68, we are aware of the ballot,” said Emma Kalliomaki, managing director of ANNA. “As long as Bloomberg is pursuing ISO status for the FIGI, the ISO evaluation process for overlapping standards will involve analysis of costs, benefits and risks to the whole industry. It’s a necessary process to ensure the industry isn’t burdened with the fragmentation and inefficiency that is caused through overlapping standards.”
Kalliomaki won’t comment on Bloomberg’s claims of FIGI’s superiority over the ISIN. Instead, she says that the evolution of the ISIN speaks volumes about its adaptability. “The ISIN was originated, and continues to evolve, through industry-based ISO consultation process, including response to market need,” says Kalliomaki. “This process continues at intervals utilizing working groups of industry experts, industry polling and feedback, until final adoption of any revision of the standard by ballot. This has ensured the ISIN standard remains fit for purpose and continues to evolve with market needs.”
Unlike the ISIN, the FIGI identifies financial instruments by their market presence. The underlying data includes both the market in which the instrument is traded as well as its ticker symbol. The complete FIGI methodology, which includes market-level identifier, the country level identifier and the global identifier, presumably offers traders the possibility to view enterprise-wide exposuers or to evaluate market activity for investment opportunities or trends.
While the FIGI appears to have been embraced primarily by front-office users of Bloomberg terminals and services, ISINs have also won popularity for an array of middle and back-office functions including settlement and recordkeeping. When used in conjunction with the Market Identifier Code (ISO 10383) issued by global message network operator SWIFT, financial instruments can have market-level identification, according to ANNA.
“This has been the approach of ISO financial standards.” says Kalliomaki. “Each standard has a defined scope, enabling them to stand alone for a variety of applications, but also to provide the necessary granularity when used together.”
In 2015 a study group established by the TC68 committee concluded that the benefits of having two identifiers or a different identifier would have the outweigh the potential disruption to the financial market. The group decided that for an overlapping standard to be considered two critical elements must be addressed: one is whether a current standad could be amended to fix any perceived gap in the functionality of a current standard and the second is whether a market demand eixists for a different standard.
Because FIGIs and ISINs are both twelve-digit alphanumeric codes they are virtually indistinguishable to the naked eye and to databases, where they could fill the same field. That is, until it become apparent that the same financial instrument is being identified by two different codes as in the case when a trade fails to settle on time.
“The point of a standard is to have one you rely on.” says Kalliomaki. “Having two standards in the same operational field equates to having no standard at all.”
Even if the TC68 committee doesn’t vote in favor of the FIGI continuing toward ISO accredidation, it is unlikely that Bloomberg will give up its furious fight to dilute ISIN’s dominance as the global instrument identifier — especially as new regulatory reporting standards are on the horizon around the world.