Industry Bodies to Identify Business Requirements for CFI Standard

Washington, DC - Industry associations the EDM Council and the International Securities Association for Institutional Trade Communication (ISITC) are both assessing the classification of financial instruments (CFI) standard, looking at requirements and coverage, officials tell IRD.

The EDM Council is aiming to compile a list of requirements for the code to send to the International Organization for Standardization (ISO), following concerns from members that the revised version of the code will be complex to use.

ISO Working Group 6, the group covering the ISO 10962 CFI standard, has completed its review, and the new version is now being circulated as a Final Draft International Standard, which is the final stage before publication as an ISO standard.

"I don't think the new version is complicated on its own, but rather reflects the increasing complexity of the financial instruments," says Zurich-based Nourredine Yous, the convener of the group.

Before the revision, which will expand the scope of the code, some market participants complained it was not comprehensive enough. Following the revision, Washington, DC-based Mike Atkin, managing director, EDM Council, says the message from members is that the standard is too complicated.

"The identifier can't be everything to all people," he says, adding classification is an important component of everything data managers do, but the market has to establish how the CFI code is used.

The EDM Council is now considering requests from members to help define requirements, researching where and how firms use the CFI code, and will provide ISO with the conclusions.

Meanwhile, the ISITC reference data group is looking at aligning the ISITC classification code with the CFI code, a project that has been on the agenda for a while.

The ISITC code is used, for example, in security settlement to identify the security type when it is not yet assigned a security identifier, and this can overlap with the CFI standard. "We know there are a lot of security classification lists out there, including ISITC's, ideally we would all be using one list or standard," says Anthony Videtto, chair of ISITC's reference data group.

The aim of the work will be to identify differences in instruments covered, and report back to the ISO. "We will be lining them up to understand the gaps and see if it is feasible to adopt, or modify the CFI for our purposes" he says.

The CFI standard is regularly revised, but the comment period for the current revision of the standard has passed. ISITC can still submit formal comments and make suggestions for how the code can be improved in the future.

New York-based Karla McKenna, director of industry leadership, securities and fund services, at Citi, and chair of ISO TC68, the technical committee for financial services that develops and manages international standards for financial services, says: "ISITC is one of the strong supporters of the ISO process, and we are glad ISITC is taking an interest in reviewing the CFI standard."