Following the announcement back in June last year that it would be teaming up with HedgeFund.net to develop entity identifiers for the hedge fund community, Cusip Global Services (CGS) has said that it is planning the launch of its Cusip for hedge funds service for the fourth quarter of this year. Darren Purcell, director of CGS in Europe, explains to Reference Data Review that the vendor is putting a lot of effort into building up coverage of the hedge fund market, as well as coverage for other new areas of interest including US equity options and government economic stimulus programmes.
CGS signed up to work in partnership with hedge fund and fund of hedge fund information provider HedgeFund.net to produce a Cusip identification system for hedge funds and funds of hedge funds on a global basis in June 2009 and has since added around 4,000 hedge fund identifiers to its database. “We are creating Cusips for hedge funds at the moment and we are building up our coverage for the launch of the service, which will likely be in the fourth quarter of this year,” says Purcell. “We need to make sure we have a sizeable representation of the market and there is further product development needed for the feed, as well as building up the database.”
In spite of the fact that the European Commission has yet to provide a definitive ruling on its ongoing investigation into CGS’ pricing of US ISINs, which began back in 12 January last year, it is therefore business as usual for the vendor, which has been busy launching new identifiers for markets including US equity options and European syndicated loans over the last 12 months. The European Commission released its preliminary findings on its investigation into the vendor’s pricing practices for ISINs in the US in November last year, but has, thus far, failed to provide the industry with a final judgement.
Last year, the Commission released a memo in which it indicated that it considers the vendor to be “abusing its dominant position” as the sole appointed National Numbering Agency (NNA) for US securities by requiring its European customers to pay licensing fees for the use of ISINs in their own databases. As the sole issuer and disseminator of ISINs in the US market, the Commission stated that CGS business is practicing unfair pricing and is therefore in infringement of Article 82 of the EC Treaty concerning rules on abuse of a dominant market position. CGS has since responded by “strongly disagreeing” with the ruling, but is awaiting further action to be taken by the Commission.
“We have been working closely with our clients and keeping them informed of any developments with regards to the European Commission investigation. It is business as usual until we hear otherwise and there has been no confirmation about the deadline for a possible ruling,” says Purcell.
In the meantime, the vendor has more than enough to be getting on with. The introduction of official Cusip codes for hedge funds is a continuation of the aggressive expansion of asset class and legal entity coverage by CGS that has been ongoing over the last couple of years. “The advantage of being a focused numbering agency is that we can build up our coverage over the long term and invest in our content. For example, the market had not previously used ISINs or Cusips for the world of exchange traded options and we were able to build up this content as time progressed,” contends Purcell.
In order to launch its US equity options service, CGS opted to partner with UK-based futures and options specialist FOW Tradedata back in May last year and launched the new service at the end of June. Over the last year, the vendor has since created 307,245 new identifiers for equity options.
“For the European syndicated loans market we are now issuing Cusips and ISINs for the main agent banks in Europe and we have issued around 3,000 ISINs on these to date,” adds Purcell of another of its initiatives. The S&P owned vendor launched the new platform through which European agent banks can request Cusip or ISIN identifiers back in July 2008, at the same as it added a premium level version of Cusip Access for clients that require more advanced options for managing reference data. The syndicated loans service is essentially an online European bank loan application (EBL) platform that allows European agent banks to request the assignment of Cusip identifiers and ISINs for syndicated loans originated in Europe.
“We are busy looking at the Cusip database by segment and we recently launched the government stimulus package segment,” continues Purcell, referring to yet another addition to CGS’ overall offering. In May this year, the vendor created a specialised data feed exclusively for assets linked to government stimulus programmes. The Government Stimulus ID Service covers the economic stimulus programmes sponsored by the US government since 2008.
Of course, CGS has also launched a joint venture with DTCC owned entity identification specialist for the development of the Cusip Avox Business Reference Entity identifier (Cabre) codes database, but that’s another story.
These new services are all on top of the vendor’s more traditional Cusip offerings, which have also kept CGS busy this year. According to its figures for the first half of 2010, CGS has issued 202,000 corporate and municipal Cusip identifiers, an increase of 58% over the first half of 2009.
However, the development work is not stopping at adding new content. “We are also looking at how to create more user friendly toolkits for the database,” adds Purcell. “In our feed products we are trying to make sure that we are continuing to provide toolkits to bring all the connections together. For example, if a client wanted to link a Cusip security identifier to an issuer’s and then to a Cabre, we need to make sure this is possible.”
In order to make things more user friendly, the vendor has also developed a new financial instrument request system called Cusip First, which allows bulk issuers to fast track new Cusip issuance in 15 minutes or less.
The vendor is doing all this work to increase its competitive standing and is keen for firms to come direct, rather than via a vendor, for data. “There is a big push from us to encourage our clients to take Cusip feeds from us directly rather than via vendors. We are trying to bring additional value added benefits for direct users by enriching data via linking together codes, or managing corporate actions on those issuers or providing the historical view on how those issuers have been impacted by corporate actions over the years,” says Purcell.
“Our vendors will remain an important distribution channel for us but we can also offer clients services directly if they wish to collect the information from source,” he concludes.