ISDA Symbology
2015 end of year update
Public
®ISDA
is a registered trademark of the International Swaps and Derivatives Association, Inc.
Copyright © 2016 International Swaps and Derivatives Association, Inc.
Symbology Project
Goal:
Create a standard symbology for derivative products for pre-trade, trading and post
trade workflows, to be used by the entire industry, as an open-source standard. i.e. a
methodology for the identification of derivative products.
How does product symbology differ from unique product identifiers (UPIs)?
The work on product symbology is closely aligned with the CPMI-IOSCO work on
UPIs, and the product symbols should be consistent with the known UPI
requirements. The primary focus for a UPI is the aggregation of data that is reported
to trade repositories. In addition to reporting and other regulatory requirements, the
Symbology group is looking to satisfy certain business requirements, and is
considering the operational and infrastructure implications of the introduction of
product symbols in various processes.
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Symbology Project
Why:
Regulatory drivers (MIFID II/MIFIR, SEC, CPMI-IOSCO,...) and general business
drivers (reduce complexity, simplify aggregation of liquidity,...)
Who:
Project under ISDA governance with buy side, sell side and market infrastructure
representation.
- open process
- broader consultations envisioned
Objectives:
 Define the required level of granularity for the different products/asset classes,
taking into account regulatory and business requirements;
 Evaluate approaches to the format of actual identifiers ( length, intelligence, ...) and
help build industry consensus;
 Facilitate infrastructure build-out according to agreed principles.
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Symbology 2015: Achievements
-
Implementation report - principles and recommendations for a derivatives product
identifier (key principles document for working groups to follow in design)
-
MIFIDII/MIFIR regulatory report (analysis of the MiFID II/MiFIR regulations with focus on
identifier requirements)
-
Report on data analysis carried out using US SDR data (Interest Rate derivative transaction
data from Swap Data Repositories (SDRs) was analyzed to aid definition of the hierarchies
proposed. Analysis looked at: 1) number of identifiers that would be created for a given level of
granularity 2) ratio of those (potential) identifiers versus the actual reported trades)
Symbology hierarchy approach provisionally defined for primary products in credit, equity
and rates by each asset class working group (slide 5 & 6)
-
-
External outreach to regulators and trade associations
-
Analysis of ISIN standard, meetings with ISO/ANNA, with agreement to develop joint working
group with ISO (Annex 1)
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Symbology 2015: Current draft hierarchy being
discussed in project
Hierarchy
Credit
Asset Class
Level 1 :
Liquidity
Determination
Credit
Level 3 :
Position
* To be confirmed
Equity
Asset Class
Rates
Asset Class
Equity
Base Product
Single
Name
Index
Base Product
IR Swap
Base Product
Swap, Portfolio Swap
Sub-Product
Corp,
Sov…
iTraxx,
CDX
Sub-Product
Fixed Float
Sub-Product
Price, Div, Vol, Var Return
Transaction
Type
SNAC,
STEC...
iTraxx
Europe
Transaction
Type
ZC, OIS, Plain Vanilla
Transaction
Type
Single Name, Index,
Basket
Ref Entity /
Index
RED6 or
LEI
RED6
Notional Ccy
ISO Code
Underlying ID
ISIN, Index ID,
“Basket”
Notional Ccy
ISO Code
ISO Code
Maturity Date
2023-1019
2023-1019
Float Leg Index
LIBOR, EURIBOR etc.
Notional Ccy
ISO Ccy
Float Leg Term
3M, 6M etc.
Funding Leg
Type
Fixed, Float, Other, NA
Fixed Leg Term
3M, 6M etc.
Float Leg Index
LIBOR, EURIBOR etc.
Maturity Year*
2023
Float Leg Term
3M, 6M etc.
Delivery Type
PHYS, CASH, OPTL
Series/Versio
n*
Level 2 :
Reporting
Rates
Seniority
-
S23, V1
Senior,
Sub.
-
Coupon
100, 500
etc.
100, 500
etc.
Market
Convention
Y, N
Return Type
Price, Total,
Restructuring
Y, N
Y, N
Full Attribute
List
See Appendix
Breakable Ind
No, OET, Other
Maturity Date
2023-10-19
Maturity Date
2023-10-19
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Symbology 2015: Main analysis questions
currently being considered
Question
Resolution
Maturity date treatment at all levels of the hierarchy still
Walk through the use-cases with the
different models and examine their
implications. Then agree on an
approach.
Is an identifier that exactly matches the liquidity determination
granularity as stated by MiFID II required?
Consensus required.
There is currently a many-to-many relationship between the
ISDA Taxonomy and the MiFID II Sub-Asset Class.
Full analysis required followed by
decision on best approach.
Baskets proposed to be marked ‘BASKET’ rather than identifying
each underlying - data collection & MiFID RTS 2 post-trade
transparency rules imply that the constituents of a custom basket
must be identified.
Discussion on the implication of
changing identifiers followed by decision
on approach.
RED code licensing and usage for Credit identifier.
Markit to elaborate on their initial
proposal and a full discussion at the
Governance Committee.
6
Annex 1:
ISO/ANNA considerations
and next steps
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Mandatory ISINs for MiFIDII/MiFIR & Working with ANNA/ISO
Final draft MiFIDII/MiFIR RTS mandates ISIN for instrument identification. In drafting this in RTS ESMA has underestimated (i) current coverage
of ISINs for derivatives, and (ii) several practical issues associated with ISIN issuance.
The ISDA Symbology initiative has identified several considerations that need to be addressed to overcome these issues, and is engaging
ISO/ANNA to evaluate how these can be implemented in time for compliance with MiFIDII/ MiFIR.
Considerations
Next Steps
The ISDA Symbology initiative is proposing
a 3-level hierarchy, tested against CFTC
public price reporting data:
1. MiFID liquidity threshold
2. Regulatory reporting
3. Post-trade economic equivalence
Hierarchy of
symbols
Requirements from MiFID, other regulators and business use cases
imply a need to support a hierarchy of product symbols for OTC
derivatives.
How many
symbols?
The number of symbols to be generated should be appropriate to
the associated number of transactions and fit within the identifier
format (i.e. format should allow sufficient number of identifiers)
On-the-fly
creation
MiFID requirements imply the creation of identifiers as part of a realtime workflow.
Develop workflow use cases with ISO /
ANNA & evaluate against existing solutions
No re-use of
symbols
The reuse of symbols must not occur because of long
maturities of some derivatives and lengthy record keeping
obligations.
Evaluate with ISO/ANNA how this can be
incorporated into the standard.
Open standard
Flexibility for
innovation
Timing
Solution
selection
Are there any restrictions that might inhibit widespread
distribution, access or usage of the symbols and associated
metadata?
It is critical that the standard and its implementation be
sufficiently flexible to allow timely extension to future
derivative products.
Current MiFID/MIFIR timelines .
A successful implementation within the required MiFID timelines
may require evaluating best of breed solutions across the global
landscape.
Assess with ISO/ANNA any
impediments and evaluate
appropriate approach.
Evaluate with ISO/ANNA what is
achievable within the current framework
and infrastructure. For what is not
achievable, evaluate the potential
solutions that might exist outside of that
framework.
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ANNA/ISO Discussion on working with
Symbology initiative
 ISO agreed to form a working group with representatives from ISO, ANNA and the
Symbology initiative. 30 day call for expert to go out, ISDA has been asked to provide
he convenor for the working group
 ANNA general meeting feedback:
 Covered the various scenarios that exist to meet the industry requirements
 The Board advised the membership that 'expertise' participation in future industry WG discussions
on OTC Derivatives would be required in the short to medium term - as the more detailed 'solution'
focused discussions progress.
 The principle of ANNA working with the industry to derive a solution that works for the whole global
market and for the ANNA membership that will be responsible for ISIN assignment was tabled and
endorsed.
 There was a very positive attitude amongst the members that ANNA can step up and meet the
challenge
 List of experts submitted to ISO to participate in joint WG with ISO
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