Bloomberg has responded to a European Securities and Markets Authority (ESMA) consultation on European Market Infrastructure Regulation (EMIR) suggesting the Financial Instrument Global Identifier (FIGI), formerly the Bloomberg Global Identifier (BBGID), should be used as an instrument identifier for reporting under the regulation.
While the ESMA consultation opened on November 10, 2014 and closes today, February 13, 2015, Bloomberg also plans to respond in a similar way to ESMA’s latest consultation on Markets in Financial Instruments Directive II (MiFID II), which started in December 2014 and is due to close on March 2, 2015. The scope of both consultations is broad, but both ask for information about standard instrument identifiers that could be used for regulatory reporting.
In the case of EMIR, which regulates European derivatives markets, ISO standard ISIN instrument identifiers are already used, but these have their provenance in equity and fixed income markets and were only extended to cover derivatives late last year, meaning they are not yet widely used for EMIR reporting. The Federation of European Securities Exchanges promotes the addition of the Alternative Instrument Identifier (AII) to fill the gaps left by ISINs, but Bloomberg argues that the identifier will not cover all the instruments regulators want to identify and does not follow good management practice in the area of identifiers as it includes embedded information.
The case for FIGIs
Chris Pickles, a member of the Bloomberg open symbology team with a focus on the FIGI, says: “Regulators are seeing existing standard instrument identifiers being used in reporting, but they are a small proportion of all the identifiers. We understand why ISINs can be used where they are available as the ISIN is an ISO standard and we support standards, but the identifiers don’t go far enough. Bringing in the AII is questionable as it is not a standard and does not fall in line with the principles of standard identifiers. This is why Bloomberg is responding to the ESMA consultation on EMIR by suggesting that the FIGI should be another standard that can be used for regulatory reporting under EMIR.”
The ESMA consultation on MiFID II asks whether market participants agree with the association’s approach to identifiers, particularly ISINs and AIIs, and asks for alternative solutions. Again, Bloomberg will propose the case for FIGIs to be used alongside ISINs for reporting under the regulation.
Bloomberg’s argument for the inclusion of the free, open and non-proprietary FIGI standard in EMIR and MiFID II regulatory reporting is built on sound statistics – a total of 225 million FIGIs have been issued across all asset classes compared to 28 million ISINs – but regulators lack awareness of the identifier and market perception of the FIGI as a commercial Bloomberg identifier remains a problem.
Challenging market perceptions
Pickles’ job is to spread the word about the FIGI and work with Bloomberg colleagues to find ways to achieve market acceptance of the FIGI as an open, standard, non-proprietary and free identifier. He says: “We need to make it clear to the market that we are doing what would be expected around an international open standard.”
The FIGI became an Object Management Group standard in October 2014 and the ISO will consider how it could make the FIGI an ISO standard at a meeting in May 2015. Trying to put some distance between Bloomberg and the FIGI, Pickles says the company is looking at options including setting up a separate business for the FIGI or providing it with its own board of governors. The company is also looking at access to the identifier, which is provided at bsym.bloomberg.com, but may be better provided using a url that is not Bloomberg branded.
Meantime, the regulatory waiting game is underway with ESMA expected to provide technical standards for regulatory reporting when it makes a final response to the EMIR consultation in May 2015 and the MiFID consultation in June 2015. Pickles is hoping for a positive result for the FIGI, but says the regulatory awareness campaign will continue whatever the outcome and that large investment firms are expected to continue to select the identifier as a means of standardising their own regulatory reporting and business operations.