Last Thursday, WatersTechnology hosted a small luncheon of CIOs, CTOs and CDOs at the Sea Fire Grill in midtown Manhattan. It was a small crowd—just five individuals not including WT staff. The aim was to get a feel for whether senior technologists are ready for the return of face-to-face events, or whether they are still reluctant to get back to in-person conferences as the pandemic continues. 

Granted, it was a tiny group, but the feedback was a resounding “YES” to the former. Now—these are people who were willing to show up to a Midtown restaurant, so they clearly are comfortable with getting back to normal. Will that extend to a larger conference with 200 people or more mingling around? I’m one of those who has his vaccinations and is getting back to regular life—I go to the White Horse Tavern once or twice a week, and I shoot pool in a league on Sundays. My longtime girlfriend prefers to work from home, eat outdoors if possible, and isn’t playing in the Sunday pool league anymore.

This is all to say that we’re still working things out as individuals and as a company. My guess is that we’ll first move to a virtual/hybrid conference model, which is something that I’ve seen Sifma doing. I applaud these efforts by the trade group as it will help the rest of us to see what can and can’t work.  

While I have no clue when our physical conferences will return, what I can say is that it was heartening to hear the execs last week talk about the need for in-person events—hopefully we’ll get back to them sooner rather than later. Have thoughts on our events? Let me know: anthony.malakian@infopro-digital.com.

Identity crisis

The topic of security identifiers is not exactly the sexiest subject, but it’s an important (and costly) one, and it’s a subject that is becoming increasingly interesting—you know, if you are one of those few reference data diehards (of which, a surprising number of our subscribers are).

I was reminded of this after a couple of stories that we recently published and an announcement that we’re still looking into.

First, Bloomberg finally gained accreditation in the US for its reference data standard, the Financial Instrument Global Identifier, or Figi.

Second, Broadridge has developed a data ontology to help trading firms integrate and map trade data across front-to-back office systems. Mike Bennett, an ontologist at Scotiabank and the standards liaison for technology standards consortium the Object Management Group, says an initiative such as Broadridge’s BRx will find wider adoption if it is published by a standards body rather than a vendor. The Figi is also owned by the Object Management Group, which adopted the identifier from Bloomberg in 2014 under this same premise.

And third, the Financial Industry Regulatory Authority recently published “a regulatory notice requesting comment on its policy relating to the assignment of OTC symbols to unlisted equity securities. Finra is considering whether it should begin assigning OTC symbols to unlisted equity securities that do not have a valid Cusip identifier, in the limited circumstance where a broker-dealer demonstrates its best efforts to obtain a Cusip identifier and provides documentation to identify the security.”

Let’s start with that third one first. We’re still in the process of better understanding Finra’s desires here—is the entity saying that Finra, itself, should create a new identifier, or should it mandate the use of an already existing identifier? As I understand it, alternative identifiers Figi and LEI (legal entity identifier) already have the ability to identify the instruments and issuers not covered by Cusip, such as in the realms of crypto assets and derivatives. Or, will Cusip, which has served as the main identifier for American and Canadian securities markets for the better part of 60 years, be called upon to expand its coverage? Is that even feasible?

Now, one way this could be read is that Finra is potentially looking to invent an entirely new identifier that isn’t Cusip, Figi or LEI. If my assumptions are correct—and, again, we’re still reporting and I am just kicking the tires right now—I would assume this identifier would be run by Finra, or they would designate some trade body to make it, which would probably make someone a nice chunk of change if there were any licensing fees associated with it. 

Cusip, which is owned by the American Bankers Association and operated by S&P Global Market Intelligence, can carry hefty licensing fees up to $441,000, according to a fee calculator on Cusip Global Services’ website. Figi, on the other hand is free to use. And somewhere in the middle is LEI, which was created through a joint effort between G-20 economic leaders, the Office of Financial Research, and the Financial Stability Board. Operated by the Global Legal Entity Identifier Foundation (Gleif), the LEI comes with an application fee and annual maintenance fee.

Anyway, I’m recklessly speculating here, so let’s just say that the comments will be interesting, and when we get more information on this announcement, we will report it.

Now, let’s go to that Broadridge story, which is in and of itself separate from what Finra is proposing or Bloomberg’s Figi. What I did find interesting is what Scotiabank’s Bennett told our Hamad Ali:

Bennett was the originator of the Financial Industry Business Ontology, an initiative by the EDM Council and the OMG to establish a common ontology for the financial industry. He says Broadridge could hypothetically join the OMG and get involved with the Fibo initiative, contributing any new terms the vendor might have, adding that standards are created through collective industry efforts rather than single providers: “That is how standards work. Standards don’t work by some vendor going: ‘I am big enough to do a standard.’”

That’s not to say Broadridge’s ontology could not be adopted by the industry, however. “It is not impossible,” Bennett says. “Bloomberg has brought standards to the OMG. But as soon as it becomes the standard, it is no longer owned by that vendor. Vendors cannot imagine that they have a thing that’s globally adopted and it [can remain solely] their thing.”

Obviously, Bennett has a horse in this race, but I think his comments go to show how difficult it is to not just create these reference data products, but to get them adopted.

Which brings us back to Figi. According to Bloomberg, Figi is up 2.8% YoY in terms of new accounts. It’s mapping six billion unique alphanumeric codes to other codes and instruments on a monthly basis. (Mapping is done when a user accesses the OpenFigi API to search for the corresponding Figi to another identifier, such as a regular ticker, Isin, or Cusip. Each of those hits returns that Figi along with the associated descriptive metadata.)

One of the questions that remain for Figi since its US accreditation is: Given that the US Securities and Exchange Commission expressed interest last year in letting Figi be accepted in regulatory reporting, will the backing from ANSI/X9 prompt the Commission to pick that idea back up again?

Also, the industry now has an entirely free reference data standard to use at a time where cost pressures are high. Will Cusip and the ABA lower its fees, or perhaps offer some other scheme to keep their customers enticed?

Figi also has to contend with an optics issue. Despite the fact that Figi is under the domain of the OMG—operationally, Bloomberg is only one of two certified providers—users would be handing Bloomberg the reins of yet another critical part of their trading operations. They already rely on the Terminal in the front office, now the back-office would be Bloomberg-heavy (or even heavier), too. The idea of concentration risk comes into play: Can Bloomberg be all things to all men? It looks like they’re trying. Can’t blame ’em.

I’m sure there are other issues at stake, and I’m sure that I might be reading some things wrong since reference data is such a niche and insanely wonky part of the market. If so, please do set me straight: anthony.malakian@infopro-digital.com.

The image at the top of the page is “The Defense of Champigny” by Edouard Detaille, courtesy of The Met’s open-access program.