His talk "Case Study: Challenges to Supporting Open Data" will give a synopsis of the work Bloomberg L.P. Has done with the Object Management Group in the development and support of the Financial Instrument Identifier (FIGI), the only open data identification framework for financial instruments.
What follows is some primer material to his OSSF talk.
This talk will give a synopsis of the work Bloomberg L.P. Has done with the Object Management Group in the development and support of the Financial Instrument Identifier (FIGI), the only open data identification framework for financial instruments. Exploring the reasoning on why a for-profit company would invest in, and continue to support open data, the speakers will cover internal and external challenges in doing so. The evolution of FIGI, and what the future may hold in regards to standards and regulation will be examined. Finally, a wrap up on the pros and cons of "competing" standards (open and licensed), drivers for innovation, and the good and bad impacts of regulation.
Background on FIGI - Financial Instrument Global Identifier
A FIGI (Financial Instrument Global Identifier) is a globally recognized, non-changing identifier.
FIGI has applicability beyond simple security and instrument identification. The identifiers are used for managing the transition of hierarchal specificity as an instrument moves through the functional aspects of trading, settlement, portfolio management, asset servicing, risk management and regulatory reporting (i.e. the ‘contextual view’).
The use of a unique, non-changing and perpetual identifier also enables linking material changes to that instrument, maintains permanent association with those changes and provides a consistent historical perspective of that instrument changing over time through corporate actions and other events.
The case for a universal system to identify financial instruments
Identifiers of financial instruments are essential to a properly functioning industry, particularly in our age of increased transparency, global markets, and more complicated products and strategies.
While this might sound simple, individual firms use different identifiers, which can even vary between departments and functions. Yet identifiers are used to research and trade financial instruments, assess risk, manage portfolios, report to regulators, and manage settlement and clearing. For too long, the industry has not had a single methodology for identifying an entity or an asset.
In some instances, a single identifier may refer to different products, and there are still many instruments that exist with no real identifier at all. Further, corporate actions result in changes, making it difficult to track historical data.
The industry continues to struggle with uniquely identifying millions of instruments we trade daily. Lack of individual identification results in:
- Massive costs
- Lack of data quality
- Complicated data management and governance
- Limited transparency for firms and regulators
It is time to adopt a solution and embrace a new way of tackling and solving the problem. A shared open data approach will allow firms and technology-service providers to shift resources from laborious, inefficient processes to new investments in tools and products that will better serve clients and lower costs. On the regulatory side, it should simplify and streamline reporting, data aggregation and risk reporting.
Existing standards and identifiers have not kept up with the rapid changes in the market. New types of exchanges and instruments come into being, methods of trading change and existing products evolve as new product sets are created.
Many existing standards were limited in scope almost as soon as they were approved because of the contextual confines of the standard. Changes in how companies list shares, creation of new trading venues and the continual evolution of new types of financial instruments all push the boundaries of standards created with rules that may no longer apply or be relevant.
Proprietary symbology filled a significant void here in the past, but typically at a silo/product level or for a niche purpose. Product-specific identifiers that seek to extend past their original purpose struggle to encapsulate the necessary properties of dissimilar types of financial instruments, while silo-based identifiers have proved themselves unable to cross barriers from one operational unit to another within the same organization.
The core issues involved are rooted in the data, the nature of instruments, their life cycle through the financial system and the entities that exchange them. Proprietary, nonstandard and prolific symbology now stands as one of the most significant barriers to increased efficiency and innovation in an industry that sorely needs it.
This is the reason the Object Management Group (www.omg.org) took on the task of validating the Financial Instrument Global Identifier (FIGI) and ultimately confirmed it as a global data standard. Open Symbology is an open data-based system for identifying instruments globally across all asset classes. Combined with the instrument identifier, FIGI, firms are able to link fragmented proprietary symbologies, fill the gaps that remain and streamline the trade workflow. Adopting/relying on an Open Symbology and the FIGI can help put the industry on a path to greater transparency, lower risk, reduced costs, and better data management and quality, and they can improve interactions between clients, counterparties and regulators.