NORWALK, Conn., Aug. 01, 2024 (GLOBE NEWSWIRE) -- In our view, the data standards recently proposed by the FDIC and CFPB, and under consideration by the U.S. Treasury and other federal agencies (agencies), to implement the provisions for the Financial Data Transparency Act of 2022 (FDTA), contain a fatal flaw that undermines the intent of the law and risks creating a costly and distracting operational challenge for financial market participants. By proposing to establish the FIGI as the only identifier of financial instruments, the agencies have endorsed a non-fungible, error-prone and less widely used taxonomy as the required standard for reporting the identity of financial instruments. Even worse, by deliberately excluding CUSIP from being used as an option, the agencies are unnecessarily forcing market participants to change the way they report their data and how they maintain critical financial data internally.
CUSIP is currently the only standard North American securities identifier that is fungible, machine readable, and universally used throughout the financial services industry. It is relied upon to support seamless trade processing and settlement, as well as countless other mission critical functions that require accurate, consistent and fully interoperable securities identification as a foundational building block.
The same cannot be said for the FIGI. A fundamental characteristic of the FIGI that the proposed rulemaking appears to have overlooked is its lack of fungibility. Fungibility means that a specific financial instrument is represented by the same identifier regardless of the venue where it is traded. For example, Microsoft common stock is always represented by the fungible CUSIP: 594918104, whether traded on the Nasdaq or the NYSE. With the FIGI, by contrast, there is a different identifier for each exchange where Microsoft common stock is traded – a list of now more than 200 and growing. This very issue has already created widespread reporting inconsistencies where the FIGI has been included in SEC 13F filings. The lack of fungibility in the FIGI already does and will continue to reduce the agencies’ ability to monitor and assess systemic risk and negatively impact the entire U.S. capital markets, an outcome that is in direct conflict with the fundamental objectives of the FDTA. Notably, the SEC and CFTC have themselves acknowledged the importance of fungibility in their own recent rulemaking regarding filing requirements for form PF, specifically calling out FIGI as not fit for financial data reporting consistency purposes.
We are concerned that the administrative burden associated with requiring market participants to switch away from the CUSIP and use a new and largely untested taxonomy for reporting financial instrument data will create unnecessary confusion and introduce significant new errors and costs for market participants, including individual investors. These consequences could have been avoided by following congressional intent, both in terms of the practicability requirement of the FDTA and recent explicit guidance from the House Appropriations Committee to the SEC, which stated: “The Committee recognizes that the FDTA contains no reference to securities-level identifiers. The Committee expects the SEC, in its joint rulemaking, to implement the FDTA consistent with Congressional intent and avoid disrupting the U.S. capital markets.”
Regardless of any potential change in federal data reporting requirements, the CUSIP will continue to be the most widely used, trusted and reliable securities identification standard in the U.S. for a good reason. It has been proven to work across asset classes, including loans, throughout periods of extreme market volatility and in global crises. We look forward to detailing the problems with this proposal and the flawed process that led to this change in our formal comment letter, and we will work directly with regulators to develop a solution that will not create adverse unintended consequences for financial market participants. In the meantime, we call on the broader financial community to join us in opposing this ill-advised focus on an identifier that is not fit for federal reporting purposes, and which will needlessly sow confusion among global financial market participants.
About CUSIP Global Services
CUSIP Global Services (CGS) is the global leader in securities identification. The financial services industry relies on CGS’ unrivaled experience in uniquely identifying instruments and entities to support efficient global capital markets. Its extensive focus on standardization over the past 50 plus years has helped CGS earn its reputation as the industry standard provider of reliable, timely reference data. CGS is also a founding member of the Association of National Numbering Agencies (ANNA) and co-operates ANNA’s hub of ISIN data, the ANNA Service Bureau. CGS is managed on behalf of the American Bankers Association (ABA) by FactSet Research Systems Inc., with a Board of Trustees that represents the voices of leading financial institutions. For more information, visit www.cusip.com.
For More Information:
John Roderick
john@jroderick.com
+1 (631) 584.2200
