Interactive Data has added a data service to support the identification of instruments liable for French and Italian financial transaction taxes (FTTs). The service shifts the burden of maintaining and updating lists of securities that fall within the scope of transaction tax in each jurisdiction from financial firms to Interactive Data, and is ready to incorporate the requirements of additional European countries when they implement FTTs, most probably in January 2014.
The Interactive Data service generates a complete universe of all issuers within the scope of FTT rules and then determines which instruments from each issuer must be flagged up as subject to FTT. This list of instruments is updated every day to reflect any instrument-level changes and additions, including those caused by corporate actions.
In France, which has been up and running with FTTs and the Interactive Data service since August 2012, the tax applies to around 700 equity and equity-type instruments. Italy introduced FTTs on March 1, 2013, initially covering securities transactions and extending to derivatives transactions on July 1, 2013. The cost of tax on securities transactions is borne by the purchaser in France and Italy, with the cost on derivatives in Italy to be borne by both parties to the transaction.
According to Anthony Belcher, director of EMEA pricing and reference data at Interactive Data, “FTTs represent an operational challenge for financial institutions due to the complexities of the securities that are in scope and the varying tax levels on those instruments. Our service comprises the data needed by firms to understand the instruments liable for FTT. It will enable firms to easily determine the securities that fall under the scope of the transaction tax within each jurisdiction while removing the need to maintain lists themselves.”
Interactive Data will offer the FTT service as a module within clients’ data services and has made the necessary structural changes to its data service format to flag up affected securities as soon as other countries start to use FTTs. France and Italy preempted a European FTT initiative agreed by 11 European countries, excluding the UK, and expected to come into force on January 1, 2014. Each country will draft its own version of FTT legislation, but it is to be hoped from a data management standpoint that the collective requirement will be in line with the schemes implemented in France and Italy.
Colin Smart, business manager, Europe, pricing and reference data at Interactive Data, says the company’s service is expected to reach a wide audience as FTTs affect many clients offering transaction-based services as well as managers holding diverse global securities portfolios. Noting the need for issuer to issue relationship data, as well as reference data and corporate actions data, he says: “We have all this data and have created rules around it to generate a daily list and flag up securities that are subject to transaction taxes. This is not information most clients have readily available. We can take on the burden of maintaining a daily list and offer clients an automated solution that is easy to use.”