Why does CUSIP partner with and support ISITC?
ISITC's stated focus in developing and promoting reference data standards through collaboration with a diverse set of industry stakeholders and other trade associations to reduce risk aligns with our mission to enable markets to operate efficiently. ISITC’s active involvement in international standards-setting organizations provides members an opportunity to collaborate on pressing industry topics including ESG, digital assets, data normalization and cybersecurity standardization. CGS has partnered with ISITC for many years as it provides opportunities for members to gain valuable market insight on common problems while also facilitating the capability to network with industry experts.
Acknowledging these challenging times across the industry, how can financial professionals respond to the pandemic?
In our experience, the key is to be flexible and have a battle-tested business continuity plan ready at a moment’s notice. Especially in times of market stress, the reliability of the U.S. National Numbering Agency is critical to the efficient operation of global markets. Operational resiliency is especially important in the face of natural disasters, wild swings in market volatility, and other disruptive events. These are tactics financial professionals of every ilk can implement in, or propose to their respective firms for increased preparation. As our industry navigates through those challenges, market participants should also be working collaboratively with industry stakeholders, such as syndicate desks and the DTCC, to ensure that operations remain uninterrupted as the transition to a more global remote work structure accelerates. Increasingly, more firms are using data to drive their decisions regarding when to return to offices.
Our pre-trade position in the markets has given us unique insight into COVID-19’s impact on the markets. CGS recently published a report which depicted the impact that market volatility had on CUSIP request volumes. For example, the data showed a significant drop in municipal activity during the first few trading sessions after state governments began enacting large-scale shutdowns. Firms have also responded to the current environment by leveraging differentiated, alternative data to create signals to help identify disruptions in the supply chain.
What is ANNA and how is it helping to achieve greater standardization in the global financial system?
CGS is one of the founding members of the Association of National Numbering Agencies (ANNA), which is comprised of global exchanges, depositories and data vendors that issue International Securities Identification Numbers (ISIN). ISIN (ISO 6166) is widely recognized and embraced as the global standard for cross-border trading of financial instruments. No matter where a security was first issued, its ISIN enables it to be recognized and traded between buyers and sellers virtually anywhere in the world.
Under a recently renewed contract with ANNA, CGS, along with SIX Financial, co-operate the ANNA Service Bureau (ASB), a global security and entity identifier database that features contributions by more than 120 different markets. The ASB database is the single largest global repository of ISIN, Classification of Financial Instruments (CFI) and Financial Information Short Name (FISN) information.
What does engagement with a standard identification system look like across industry players?
Broker-dealers can buy and sell securities reliably by linking a security’s CUSIP to the ISIN used to trade a security on a global exchange. Regulators can monitor cross-market and institution-specific activity to evaluate systemic risk while also supporting rulemaking and enforcement activities. Asset managers can allocate and rebalance portfolio assets to ensure that their investment strategies are aligned according to guidelines. Credit risk officers can identify and manage potential external risks such as overexposure to certain counterparties. Insurance companies can identify investments in Insurance Company Schedule D Annual Filings through private placement numbers (PPNs). The National Association of Insurance Commissioners (NAIC) mandated the use of uniform PPNs by insurers to identify investments in the annual statements filed with State Regulatory Authorities. In partnership with NAIC, CGS creates, assigns and administers the PPN system. The CGS data is used to ensure the smooth execution of critical functions from asset setup to income processing and statement publishing.
What are some of your latest initiatives and what is on the horizon?
In recent years, the lack of standards for frontier asset classes has brought CUSIPs to areas like hedge funds, private placements, Market Agreed Coupon (MAC) swaps, physical precious metals (a market that stands out as one in serious need of improved transparency and efficiency) and tokenized securities. We are always looking to assist markets that suffer from the lack of standardization by applying the CUISP standard as the standard to help accelerate interoperability and compliance. In regards to product delivery, obligor-linked data is enabling increased repayment transparency for debt obligations across corporate and municipal Issuers. Enhancements were also made to create linked relationships between the underlying original CUSIP to the secondarily insured issue(s), helping to ensure that material event notices related to the issuer are grouped logically.
The overall goal of these classification systems is to foster market liquidity by uniquely identifying instruments and entities to help streamline efficiencies throughout the global financial system. CGS has helped implement and enhance data standards to make the financial world a more efficient and reliable environment for investors and the financial institutions that serve them.