The Association of National Numbering Agencies (Anna) has released an update of ISO 6166, the standard for the International Securities Identification Number (ISIN), that extends coverage of instrument types to reflect regulatory developments in capital markets by including exchange-traded and over-the-counter (OTC) derivatives, as well as structured products.
The Anna Service Bureau, which is supported by Anna’s network of 118 National Numbering Agencies (NNAs) and houses the largest database of ISINs and related data, is also updating its offering with a November deadline to link several ISO financial services standards to ISIN records.
Dan Kuhnel, director of primary markets and fixed income securities at Euroclear Hong Kong and chair of the Anna board of directors, explains: “The provision of a dataset combining ISIN, Classification of Financial Instruments (CFI), Legal Entity Identifier (LEI), Market Identification Code (MIC) and Financial Instrument Short Name (FISN) data will support firms by providing a central hub of standardised data that is generated directly from the primary official source – the National Numbering Agencies.”
As well as providing improvements to business management and risk analysis – Kuhnel suggests ISINs mapped to LEIs is the ideal relationship to achieve risk management requirements – this combination and correlation of different types of identifiers and their underlying data is expected to support regulatory analysis of issues including systemic risk.
The latest version of the ISIN standard has been extended beyond equities, debt and other commonly issued and traded instruments as a result of regulatory requirements mandating that certain instruments previously transacted over the counter must now be cleared in formal venues and that these instruments must have an identifier code to facilitate transactions and be reported.
In terms of specific instrument coverage, Kuhnel says: “There has been an expansion in exchange-traded derivatives coverage from options and futures to include swaps and contracts for difference, as well as the introduction of structured products, bank loans and combined instruments. Due to the bilateral nature of OTC derivatives and the limited availability of information, these are not specified in the standard. However, with the changing regulatory landscape, there is an increase in the number of OTC instruments coming on exchange, which then brings these products into scope.”
Kuhnel suggests the extended coverage of the ISIN standard will reduce the need for firms to use proprietary codes for security identification and therefore benefit data management. Commenting on the benefits of extended coverage for regulation, he says: “Expanding the instrument coverage of ISIN enables additional regulatory reporting mandates to be executed with efficiency by reporting firms, and reports to be stored and analysed more efficiently by regulators. Existing regulation, such as EMIR and Dodd
Frank, as well as recent consultation for forthcoming regulation, such as MiFID II and MiFIR, is indicative of regulatory pursuit to adopt and mandate the use of ISO standards. Currently, ISO standards are required to be used for identification and classification of securities, as well as for place of trade and legal entities engaged in a transaction. The expansion of ISIN, through greater availability of a common identifier, improves regulators’ ability to analyse data and carry out surveillance activities in a consistent and efficient manner to assess systemic risk.”