The International Securities Association for Institutional Trade Communication (ISITC) concluded in a best practices document published by the group that, while imperfect, ISIN remains the best non-proprietary identification standard for multi-listed securities. ISITC’s goal in publishing the paper is to identify a recommend solution from a U.S. perspective and share these findings with the global community.
In the paper, the ISITC highlights the challenges that various identifiers present. For example, ISIN does not indicate the specific exchange that a security is listed on. However, ISIN, as the industry standard identifier, can be processed by all systems. Other proprietary options such as SEDOL from the London Stock Exchange, Bloomberg Global ID (BBG ID), the Reuters Instrument Code (RIC) and CUSIP from the American Bankers Association are not ISO standards and not all systems support these identifiers.
“Each presented benefits and challenges for segments of the organization that state ‘I have that identifier here but am unable to support it downstream, or a particular processing system is unable to receive it without intervention.’ So across the board, what we all think of as the best recommendation to promote at this point in time is ISIN,” said Tom Brown, executive sponsor of the ISITC reference data and standards working group.
The lack of a proper identifier can create settlement, reconciliation and corporate actions errors when the incorrect exchange is used for a multi-listed security. These errors include reporting inaccurate portfolio holdings, delayed or missed identification of corporate actions events and pricing mistakes due to currency differences. Trading a security listed on the wrong exchange also creates risk management problems, as the trade may take place in a different market or currency than intended.
Without an industry-wide solution, ISITC considers ISIN as the best practice for now, but the group hopes to use these findings as a jumping off point to find a solution that can serve as a unique identifier for multi-listed securities, such as one of the proprietary options or ISIN combined with a Market Identifier Code (MIC). That solution may not be used for everything right away, but Brown says that even just coming up with an industry standard for corporate actions would be beneficial.
“We do consider this a step in the right direction,” said Brown. “What we are going to do is continually work with the broader community at large, including other industry groups, to come up with better or more refined solutions for each of these segments in the process.”
ISITC plans to complete a follow-up study sometime by mid-2014.
ISITC Finds ISIN Is Best Current Identifier for Multi-Listed Securities
The International Securities Association for Institutional Trade Communication (ISITC) concluded in a best practices document published by the group that, while imperfect, ISIN remains the best non-proprietary identification standard for multi-listed securities.