Unique instrument
identification has become a critical requirement to improve the efficiency
of securities transactions processing and to meet the automation objectives
associated with straight through processing (STP).
The global financial
industry needs identification numbers to be accurate to facilitate the
objectives of automation and risk management. Research has demonstrated
that inaccurate reference data is the cause of 30% of trade failures in the
securities industry. Of these failures, an estimated 20% can be attributed
to trade details that fail to match due to problems with identifying
securities instruments in a unique or timely manner.
The core problem is
that there are too many security identification numbers, but none that
uniquely identify all attributes required for precision. The securities
industry has therefore united to define the data elements required for
unique and precise instrument identification, and to determine how they will
be assigned, linked to international securities identification numbers (ISINs)
and maintained on an ongoing basis.
The joint discussion
paper outlines the challenges associated with global trading, particularly
in multi-listed environments. It also defines the importance of a unique and
precise financial instrument identification scheme. The best practice
recommendations and potential solutions described in the document are based
on the core criteria of uniqueness, timeliness and commonality and can be
applied to the full lifecycle of a transaction.
John Gubert, Head of
Group Securities Services at HSBC Holdings Plc. and Chairman of RDUG, said,
The issues outlined in this paper are particularly timely given the moves
undertaken by the Group of Thirty (G30) and other industry bodies on the
importance of quality reference data and its relationship to global
clearance and settlement. This paper recommends a logical approach to the
issue of unique instrument identification and will help bring us all closer
to achieving true STP.
Steven Kelly, Vice
President, Global Clearance, Goldman, Sachs & Co. and Chairman of the REDAC,
said, The timeliness, accuracy and integrity of global reference data is of
fundamental importance to improving the efficiency of transactions
processing. The recommendations in this joint paper represent an important
step forward for the industry toward addressing the long standing challenges
of cost containment and risk mitigation.
About
the Reference Data Coalition (REDAC)
The
Reference Data Coalition (REDAC) is an international coordinating body of
broker/dealers, investment managers, custodian banks, depositories and
others designed to define the data elements and standards necessary to
precisely describe the assets and account entries required to make global
trade processing more efficient.
