FIX Community Sponsors ISIN Study Group

Industry body FIX Trading Community has announced its sponsorship of the International Standards Organization (ISO) study group developing rules for the use of International Securities Identification Numbers (ISINs) to identify over-the-counter derivatives.

The group—officially called the ISO TC68/SC4/SG2 Study Group on ISIN Allocation for OTC Derivatives—was convened after the European Securities and Markets Authority (ESMA) mandated the use of the securities identifier for regulatory reporting of derivatives under the Markets in Financial Instruments Directive (MiFID II). However, its focus extends beyond the ESMA requirements to look at a single global identifier for OTC derivatives.

Sassan Danesh—co-chair of the OTC Products Committee of the FIX community, managing partner at Etrading Software and a member of the study group—spoke to Inside Reference Data about FIX's interest in the group.

Danesh says that if OTC derivatives are to be assigned ISINs, the industry will need to have real-time creation of the codes. FIX, as a provider of an open standard specification for message interchange in markets, "is good at real-time message flow interaction between different systems," he says.

Real-time ISIN production would have several impacts, says Danesh. "One of them is that we will need to have machine-to-machine communications for the ISIN, so we need some kind of message format, ideally an open source format, for that. FIX already does a lot of workflows around reference data dissemination, which is really what this boils down to.

"So, we are looking at enhancing our FIX reference data message flows and making sure they are fully capable of supporting real-time ISIN infrastructure that the world needs as a result of the MiFID II requirements."

The study group is also considering other protocols—derivatives syntax FpML and ISO standards such as ISO20022—to ensure their interoperability, says Danesh.

FIX is aiming to provide its recommendations for a set of best practices to support the creation and dissemination of the ISINs using FIX open standards to the study group by the end of May.

Danesh says he has been very encouraged by the inclusiveness of the ISO Study Group and the high level of interest and participation in its use case groups from buy- and sell-side institutions, trade associations and regulators.

"ISO has a very specific governance process as to who can participate in ISO groups. That means a lot of subject matter experts potentially would have been excluded because they don't fit the ISO rules. So what ISO has done is that around the periphery of the study group they have created lots of ‘use case validation teams'. These are filled with industry experts and anybody who is an expert can come forward and participate. These teams feed into the core study group and are led by a study group member," he says.

The group's membership is global, so it meets weekly via conference call. A face to face meeting is planned for New York in coming weeks.

Danesh says that while the study group has its work cut out for it, he is hopeful that ISIN allocation for OTC derivatives will be possible by January 2018, the MiFID II compliance deadline.

"Now that I look at what is currently in train—we have the right group of people, their willingness seems to be there—that is what is going to allow the industry to push forward and FIX is doing its part to maintain this positivity."