How FIGI adapts to, and innovates with financial markets

This article was written by Richard Robinson at Bloomberg. 

The financial industry experiences constant change requiring continuous innovation and persistent development. Standards help create a stable foundation amidst this ongoing change, although there are times when they too need to grow with the industry.

There is something healthy in the creation and adoption of new standards, especially when they enable backward compatibility and interoperability with older, less flexible standards that belong to a simpler time.

The Financial Instrument Global Identifier (FIGI) is a more recent standard that exemplifies how new concepts in data management resulted in a solution that is innovative and a departure from previous identification methodologies. The FIGI improves the process for managing the identification of financial instruments in context, as well as enables interoperability with existing, legacy identifiers. The FIGI standard signals multiple new expectations for data and identification systems moving forward.

A standard of the Object Management Group since 2014, FIGI’s innovative nature won it additional accreditation as a standard for the United States through ANSI/X9 in 2021. There are four primary attributes FIGI is built upon that differentiate it from other identifiers and provide significant value:

• FIGI is the only instrument identifier system that is based on a contextual data model, supported by metadata and having self-referential ability
• The FIGI identifier portion will never change once issued, establishing an identifier with permanence
• FIGI enables interoperability between existing systems, which facilitates future flexibility and growth
• FIGI is the only financial instrument identifier system offered under the MIT Open Source License. This ensures FIGI is provided free of charge for the public trust and benefit

FIGI and the MIT Open Source License

There are a lot of confusing messages regarding ‘open data.’

Some use it to describe ‘open markets’ where users can access many different services through APIs or similar access protocols. While the APIs and marketplace infrastructure are open and typically license-free, that does not mean that the services accessed are open or license-free.

In other cases, users may be permitted to access or use data or identifiers free of charge, but with limitations. These limits are typically set at the level where tracking and recovering license fees would be under some break-even point, or access is limited to paying users until some time period in which the data holds no real value.

There are also different types of open data licenses.

The MIT Open Source License, in contrast to other open source models (such as Creative Commons), is very simple. The data contained in the standard – both the identifier and the basic descriptive information – is provided without restrictions as a public good. Access is provided to this data on equal footing. For example, the APIs used to automate FIGI data retrieval are the same for individuals as they are for the largest corporations.

FIGI and a contextual data model

Data professionals have begun to understand that context in data is important.  Traders have different needs than risk managers or settlement operations managers, which impacts the type of data that needs to be associated with a financial instrument within different contexts. FIGI takes this into account by allowing for a different data model for different types of assets and providing for different contexts for different types of users for the same type of asset.

This flexible data model caters to new asset types and contextual changes. FIGI was conceived prior to the breakout of digital assets and cryptocurrencies. But because of the thoughtful construction of the standard, adding a crypto-currency contextual model was a trivial addition and was rolled out with the help of Kaiko, one of the Certified Providers, in a matter of months.

FIGI and permanence

FIGI takes a different approach towards identification in comparison to older standards and methods. All existing methods for instrument identification, aside from FIGI, have included some level of visual clue to the asset being identified, or included other encoding in the identifier – such as another coding system used to identify another data element or from another country or system.

When there are changes to either the visual naming system or the embedded coding system, the identifier must then be changed. Ticker symbols are the easiest way to illustrate how company name changes typically result in a ticker change as well. Without permanence, identifiers may also be re-used for different objects. If an identifier changes, this results in forcing amendments to all outstanding trades, as well as impacting historical traceability as old trades and positions will have the previous identifier.

FIGI, however, utilizes a metadata methodology that takes into account how data may change over time, and when this happens, there is no material impact on the object itself. By including permanence in the standard, FIGI ensures that one identifier will not be re-used for some other object. This also means that all objects created will always have a FIGI, even after they cease to exist financially, enabling lineage and traceability.

FIGI and interoperability

FIGI is a powerful tool in interoperability. Through metadata extension, simple relationships can be created between FIGI and other identifiers – whether those are other instrument identifiers or other descriptive properties.

Deeper data models can easily be created through named properties and extensions, creating relationships among underlying assets, other contexts, or ties to other data models. Furthermore, FIGI enables ties between legacy systems and old databases to newer visual systems. By creating relationships to older database identifiers directly in the FIGI metadata, the FIGI metadata payload can be used to carry this data from older systems and storage pools to newer systems.  This reduces the amount of rebuilding and integration needed, as it can be more costly and error prone to replace these older embedded systems as opposed to using tools like FIGI that can act as interfaces.

FIGI and change

There will always be change. What continues to be important is adapting to new methods and solutions that fit the current environment, and not remaining indebted to legacy solutions. While it’s not possible to uproot and remake our foundations, there is something to be said for a proper remodel, versus constant workarounds and repair.

FIGI provides the first meaningful and impactful change and upgrade in the instrument identification space. FIGI has been shown to be future proof, handling new concepts like cryptocurrencies, as well as providing support for the newest thinking in data management. To enable the best in data management, we need to use standards and tools that natively incorporate concepts like context, semantics, metadata, and data modeling.