Simplifying Symbology

As the reference-data community copes with establishing unique-instrument identifiers, the ANNA Service Bureau, an association operating on behalf of the Association of National Numbering Agencies by Telekurs Financial Switzerland and Standard & Poor's CUSIP Service Bureau USA, has announced that it has released an ISIN-MIC solution. Effective immediately, the ASB has added the Official Place of Listing and place of trade via a linkage of its ISIN codes to the Market Indentifier Code (MIC).

The news comes just days after the London Stock Exchange announced its plan to postpone its release of its new SEDOL Masterfile, which is now scheduled to launch on March 8.

The two solutions are potential answers to the industry's need for greater granularity than what has thus far been provided by the ISIN (ISO 6166), the international industry standard that most firms use to identify issues.

While the ISIN of a security describes many basic characteristics of that security, there remains confusion around where an instrument trades. "There is an issue of multiple securities being listed in multiple markets," explains Rich Robinson, assistant vice president and senior business analyst at Deutsche Bank AG, who also co-chairs the Unique Security Group at the Financial Information Services Division of the Software and Information Industry Association.

To answer this challenge, two industry groups, RDUG and REDAC, released a June 2003 white paper suggesting a MIC, an open-source code maintained by SWIFT, to identify the place of trade for an instrument.

The London Stock Exchange has responded to the suggestion within its own symbology, or identification code, SEDOL. With its capacity reaching a peak, the exchange had an impending switch from seven-digit numbers to alphanumeric coding, says an executive with the London Stock Exchange, who declined to be named. The new SEDOL Masterfile, will allow for 600 million new codes, he says, and will enable the exchange to show a security's official place of listing as well as all places of trade globally.

However, Tim Lind, a senior analyst from TowerGroup, notes that not all SEDOLs are based on ISINs, which will add to the amount of symbologies operating globally. Any new symbology equals cross-referencing labor in order to adequately equate the security being identified between two symbologies, or throughout the trade lifecycle.

Scott Preiss, vice president of securities classifications for Standard & Poor's, and vice chairman of the ASB Advisory Board, says of the LSE's plan to incorporate MIC codes, "The LSE perhaps thought that ANNA would not be able to fulfill the market's requirements," but with a combination of work from ANNA, S&P and Telekurs, "we've done it in a quicker fashion than the LSE."

He continues, "The view of ANNA is that this runs counter to the ISIN standard. It looks like at some point they looked at the market conditions and tried to estimate whether or not ANNA would step up. But it's not always easy to get 65 countries coordinated. It's like a mini-version of the United Nations."

Lind applauds the work done thus far to address the issues of standards, but adds that the industry should take more steps to uniquely identify instruments before jumping into solutions. "Let's clearly outline our requirements and agree upon them," he says. "Competing standards don't help anybody. But being realistic, we live in a multi-dialect world, so we better have architecture that allows us to translate."