Following Cusip’s Arrow

With ongoing numbering and identifier standards development continuing this year, Cusip Global Services (CGS), the data language standards company operated by Standard & Poor’s for the American Bankers Association, plans to continue development of its Cabre (Cusip Avox Business Reference Entity) and CINS (Cusip International Numbering System) database.

At the helm of these efforts, Matthew Bastian, director of market and business development at CGS, sees the Office of Financial Research (OFR) legal entity identifier (LEI) initiative continuing to pick up speed in 2012, with the CFTC regulatory mandate behind it, thus bringing demand for improvements in precision, transparency and accuracy to CGS.

“We are looking for an increased partnership between the public and private sectors for reference data,” he says. “We will continue to engage our clients interested in LEI solutions. The first step with LEI is coming, ready or not.”

Cabre, developed with DTCC and Avox, is a 10-character code including a two-character ISO domicile code, embedded with a Cusip issuer number. Its purpose is to identify all institutions involved in the lifecycle of a financial instrument.

Cabre will be the CGS contribution to any global LEI standard, with mapping or embedding depending on what the industry requires. Since ISO 17442 is drafted as a 20-character code with no embedded intelligence, CGS would map to the LEI, as would all market participants either operating or using an existing identification schema.

CGS is now leveraging pre-trade data it collects and scrubs from issuers to enter into Cabre, according to Bastian. “From an LEI standpoint, our counterparty data offering is quite timely and accurate,” he says.

Overall for the LEI, CGS intends to contribute subject matter knowledge and content for the LEI utility and the standard, Bastian asserts. “LEI is a big component of what’s coming in 2012,” he says. “We expect to play and continue to play an active role as the industry moves toward creation of that global standardized LEI.”

The timeline for global adoption of the LEI is still uncertain, in Bastian’s view. “It’s impossible to predict, given the regulatory tailwinds with the OTC derivatives market,” he says.

As part of its development, Cusip has introduced TBA Cusip, an algorithm that covers new product types, particularly for asset-backed securities, adds Bastian. It developed this algorithm with Sifma, Finra and the DTCC.

In addition, the CINS database responds to a direct customer need, says Bastian. “Firms in Europe and Asia-Pacific are finding CINS increasingly useful for serving or communicating with US customers, who may be more familiar with Cusip,” he says. In addition, CGS plans to expand its CINS coverage and recently launched New Issue Alert, a service that sends out Cusip alerts every 15 minutes.

Overall, the issuance of Cusips will increase worldwide, adds Bastian, notably to cover Canadian equity options later this quarter or early in the second quarter, as well as hedge funds. CGS is working with Evestment Alliance to offer a hedge fund file of Cusips sometime this quarter. “We made a concerted effort to pinpoint Cusips for hedge funds and funds of funds in our database and encourage participants to uniquely identify these funds,” says Bastian.