Multi-Listed Securities – ISITC
Reference Data and Standards Working
Group
Presented by the Reference Data Working Group
Version 0.5
Document Revision History
Version Date
Number
0.1
4/22/2013
0.2
5/28/2013
Who
Description
Chris Hartzell
Chris Hartzell
0.3
7/3/2013
Tom Brown
0.4
7/5/2013
Tom Brown
Initial Draft
Revisions after 5/14 RDS WG conference
call
Revisions based on feedback received
during the June 2013 conference
Addition of RIC code support
0.5
7/22/2013
Tom Brown
Edits to CUSIP content
Multi-Listed Securities
Summary/Scope
Goal: The goal of this document is the following:
• Provide a brief history and background on the issue
• Discuss challenges related to potential solutions for multi-listed
securities
• Outline impacts related to multi-listed securities for ISITC
working groups.
• Outline existing identifier options that firms can utilize
• Present ISITC’s stance regarding multi-listed securities
• Refer to published documentation
History
•
•
Definition of Multi-listed Securities: An instrument that is
issued on one exchange, but is traded on second and subsequent
markets and in different currencies.
In 2003, the Reference Data User group (RDUG) and Reference
Data Coalition (REDAC) published a discussion paper titled In
Search of Unique Instrument Identifier that provides detail and
background regarding this issue. This paper is published on the
Reference Data and Standards Working Group page on the
ISITC Website.
The description of the issue and needs for uniqueness,
timeliness, and commonality has not changed; however some of
the references to potential identifier solutions do not include
some vendor proprietary identifiers available today, such as
Bloomberg Global ID (BBG ID).
Current State: Observations based on feedback from ISITC member firms
documented during discussions with the Reference Data and Standards Working
Group in 2012 and 2013 regarding working towards a best practice regarding multilisted securities are as follows:
•
•
•
Firms have already developed technology around existing identifiers.
Many firms have manually-intensive processes, as there is not an ideal,
automated solution.
For certain processes, such as the trade lifecycle, unique identification is
dependent on communication of this information downstream.
Based on some of the items listed previously, there is insufficient
agreement across the industry on how strongly to pursue a solution.
Challenges: The primary challenges that have surfaced during discussions and past
documentation on this topic are as follows:
•
•
•
•
The effort to convert existing systems and technology to accommodate
new identifiers and related data elements may discourage firms from
addressing this issue.
Some of the existing identifiers don’t provide the appropriate level of
uniqueness (for example, ISIN).
There are some vendor identifiers that help provide uniqueness, but are not
ISO standards (for example, SEDOL, BBG ID).
Some of the unique identification options available are not consistently
communicated downstream (e.g. Market Identifier Codes, or MIC).
Business Process Impacts: In 2013, the Reference Data and Standards Working
Group solicited feedback from the Settlements, Corporate Actions, and
Reconciliation Working Groups regarding messaging and market practice
impacts related to multi-listed securities, as follows.
•
Settlements
• In-scope Settlements Message Types:
• MT 540
• MT 541
• MT 542
• MT 543
• MT 544
• MT 545
• MT 546
• MT 547
• MT 548
• External issues affected by non-precise identification of multilisted securities
• Communication to service providers and counterparties
• Proper identification of place of trade
• Proper SSI derivation
• ‘False positive’ trade matching (trades match based on
ISIN, yet will fail due to multi-listed differences)
• Resolving inventory alignment
o Efficient management of inventory across custodial
locations
o Ability to consolidate like-positions
• Settlement and fails resolution
•
Internal issues affected
• Pricing – accurate pricing in the correct currencies
• Trading decisions – accurately managing foreign exchange risk
across instruments in different currencies and arbitrage
• Portfolio valuation
•
Risk management, exposure across industries, markets,
currencies based on improper rollups
•
Corporate Actions
• Multi-Listed impacts to Corporate Actions – ISIN versus a
more granular security id (e.g. Sedol)
• Delayed or missed identification of Corporate Action events
• Dates, terms, currency and default options are not always the same
across the multi-listed security
• Holdings on multiple lines of a multi-listed security – difficulty
identifying the affected underlying security
• Pricing impacts
• Processing of inbound instructions if presented on an ISIN can be
challenging to identify the underlying security
•
Reconciliations
• In-scope Reconciliation message types:
• Statement of Holdings (Accounting, Custody) (SWIFT
equivalent MT535)
• Statement of Transactions (SWIFT equivalent MT536)
• Statement of Pending Transactions (SWIFT equivalent
MT537)
• Customer Statement Message (SWIFT equivalent MT940)
• Statement Message (SWIFT equivalent MT950)
•
•
•
Currently, the ISO approved standard for “Issue” identification is
ISIN. However, ISIN alone is not sufficient for unique
identification at the “Security” level, because one ISIN can be
shared among offerings of the same “Issue” in multiple locations/
markets.
This lack of uniqueness at the “Security” or market level creates
risk of reporting incorrect transactions, holdings and/ or valuations
on various Reconciliation messages (listed above). This creates
the risk of false-positive matches when reconciling (matching
based upon ISIN/ Issue level rather than Security/ location level),
which may lead to selling incorrect holdings and erroneous
portfolio risk management/ exposure monitoring (e.g. by place of
issue, currency, etc.).
Therefore, as determined by industry priorities, the Reconciliation
Working Group would support efforts to (1) refine security
identification numerology/ standards to make them more unique,
and/ or (2) update market practices to augment existing messages
with additional market/ location information.
Available Identification Options:
•
Security Identifiers
• ISIN: ISIN is a widely-used international ISO standard. However,
ISIN alone does not provide the level of detail specific to the
exchange-level place of trade and local pricing/ valuation.
• SEDOL: SEDOL is a proprietary vendor identifier issued by the
London Stock Exchange that is also broadly utilized in the industry.
SEDOL does partially address the issue of uniqueness at the exchange
level.
• BBG ID: Bloomberg Global ID, or BBG ID, is a proprietary vendor
identifier that does help provide uniqueness at the market level.
• RIC: The Reuters Instrument Code, or RIC, is a proprietary vendor
identifier based on Thomson Reuters RIC rules. For vanilla equities,
this is often the security's ticker symbol followed by a period and
then the exchange code, with more complicated rules for complex
securities, such as futures and options. A RIC always will remain
unique at the exchange level. While RICs historically were licensed
only for use with Thomson Reuters content, in 2012-2013 Thomson
Reuters opened up use of the RIC for 3rd party content through
various new licenses.
• CUSIP/ CINS: CUSIP is a proprietary identifier assigned by CUSIP
and broadly utilized in the industry. CUSIP is owned by the American
Bankers Association and operates through S&P. CUSIP does partially
address the issue of uniqueness at the exchange level.
•
Security Identifier + Official Place of Trade
• ISIN + MIC: ISIN and MIC are international ISO standards. MIC
(Market Identifier Code) provides an additional level of detail that
specifies place of trading; however, MIC is not commonly included
in trade- related messages.
Security Identifiers +
Official Place of Trade
Security Identifiers
Characteristics
Industry Standard
(e.g. ISO)
ISIN
SEDOL
BBG ID
RIC
Yes
No
No
Uniqueness
No
Partial
Yes
Yes
Commonly Included
Yes
Yes
Yes
Yes
No
CUSIP/ CINS
ISIN + MIC
No
Yes
Partial
Yes
Yes
No (MIC)
Summary/ Recommendation: In 2012 and 2013, the Reference Data and Standards
group reviewed the Multi-Listed Securities issue with the ISITC membership,
including specific feedback from various working groups and industry forums. Based
on the challenges and available options identified, as well as member firm feedback,
the ISITC Reference Data and Standards Working Group will continue to
acknowledge ISIN as the best available, non-proprietary global instrument
identification standard. However, to the extent firms require a greater degree of
uniqueness for their respective investment strategies, they may want to consider the
proprietary options listed above and in previously published documents (see
references section below).
References:
• Unique Instrument Identifier Paper (2003) – REDAG/RDUG:
http://isitc.org/getFile.cfm?Mode=WG&f=reference%2Ddata%2Dstandards%5Cmemberdo
cuments%5Cwhite%2Dpapers%5CUnique%2DInstrument%2DIdentification%2DPaper%2
DREDACRDUG%2Epdf