FEAS Secretariat spoke with the Chairman of Association of National Numbering Agencies (ANNA) Mr. Dan Kuhnel, about the key strategic initiatives, Best Reference Data Newcomer Award, digital and security tokens task force, the impact of COVID-19, and more.
Armenuhy: Hi, this is FEASTalks and I’m Armenuhy Hovakimyan, Deputy Secretary General of the Federation of Euro-Asian Stock Exchanges. Today I am in Brussel, and hosting the Chairman of the Association of National Numbering Agencies, Mr. Dan Kuhnel. Thank you, Dan, for joining me.
Mr. Kuhnel: Thank you very much. It’s an honor for me to be here.
Armenuhy: Let’s start with the introduction of ANNA and what are the key strategic initiatives you are having in association at this moment?
Mr. Kuhnel: Great question. If I could just in case any of the viewers are not really aware of what the Association of National Numbering Agencies is, we are a global Association. We call it a federated model where we have local expertise in each jurisdiction that are handling the numbering and classifying and financial products.
So today, we have 116 members that are part of the association, and that’s covering in excess of 200 jurisdictions globally. So, for if you know anything about the numbering agencies in our functions, one of our key fair areas of focus continues to be on the assignment of ISO standards. And for the numbering agency, which was responsible for three main ISO standards, the ISIN, which is the International Security Identification Number, the CFI, which is the Classification of Financial Instruments, and the FISN, which standards for Financial Instrument Short Name. As well as we try to include the LEI into the ISIN record, to assist the regulators and market participants in having harmonized data attributes.
So, our particular areas of focus are on the ISO standards. The ISIN standard itself, has just completed a revision. We do, under the ISO world, there is a regular revision of each standard to make sure that it remains up to date and fit for purpose with the marketplace that they’re intended to serve. The ISIN standard itself is just a completed revision, and we’re expecting to launch that revision into production at the end of 2021 or early 2022, we’re still debating on the release timeframe.
The second is the CFI, which is also gone through a revision to update it. That’s expected to be published in quarter one of 2021. With that, SIX Financial has now been appointed as the maintenance agency for the CFI standard. The intention is that they would now manage the code list and making in electronic format. The main changes to the CFI have been to add classifications around OTC derivatives, which were emitted from that standard. And so we have been working to add this particular elements around OTC derivative classification.
For the FISN standard, it’s about to commence its every five year review process. And that’s due to start in the course of 2021.
As there’s a new DTS (Digital Token Standard) that has been developed. And that standard is now going through the race of the registration authority appointment process. But this is going to be a standard that’s complimentary to the ISIN because it covers both financial instruments and non-financial instruments.
The last standard related, that’s important to mention, is that there’s another new standard called the UPI, which is the Unique Product Identifier. This is under development and ANNA has been selected as the sole provider of assigning these unique product identifiers for OTC derivatives. And so we have been working very hard on delivering that and we’re intending to deliver that within the course of 2022. So that’s a key project for us in the course of the coming year.
The last one which I have to mention is the ANNA Service Bureau, which is our master database of ISINs and related information. Today we have 71 million ISINs in this database which makes it the largest global database of instrument identifiers and classifiers.
Working with our two partners, which are SIX Financial and CUSIP Global Services, we’re in the process of revamping the technology to adopting it to cloud storage and enhancing a number of the data services linked to that product. So we have a pretty full agenda in terms of the items we’re managing.
Armenuhy: It is really impressive and a lot of, a lot of jobs, I can imagine, to do next year. Good luck with this.
Mr. Kuhnel: Thank you. It’s a lot of items but very key to the financial markets and the smooth operation.
Armenuhy: Yes! Let’s come to one collaboration you had recently and ANNA had this with Global Legal Entity Identifier Foundation. And you take home the award for Best Reference Data Newcomer. Can you tell us a bit about this award and its impact?
Mr. Kuhnel: We were very pleased to have been selected. And as you know, the background here is that we partnered with the GLEIF (Global Legal Entity Identifier Foundation) and Waters Technology awarded the two organizations and their initiative to work together as the Best Reference Data Newcomer. The background is that ANNA has responsibility for the ISIN and the GLEIF have responsibility for the LEI. And we looked at, there must be a good collaboration of linking these two standards together in order to be able to have a better view on managing risk exposures to various issuers and instruments. So we actually collaborated with the GLEIF, and we designed a service of linking the ISIN and the LEI together and making it available as a product. So, today we have 22 of the numbering agencies have opted in to this initiative. And that’s a coverage of 26 jurisdictions simply because some NNAs cover multiple jurisdictions. This has contributed to the continual increase of the number of ISINs mapped to LEIs.
Now, today, we have 5.2 million that are mapped, which is almost 72,000 unique legal entity identifiers because you can have one LEI linked to multiple ISINs, because it’s at issuer level. We’re very pleased with the initiative, it’s been ongoing for 18 months now. It’s very much intended to work at meeting some of the requirements around MiFID. LEI has become embedded in a number of requirements and regulations these days. So, this was a very good collaboration to try and build a new sort of cross-ISO standard linkage for the benefit of the market and to make it freely available.
Armenuhy: Great. Together with linkages and new products, you also mentioned in the beginning about the digital tokens. This new products in financial market and maybe they will be the future also. You have a special task force. ANNA is doing the job based also on task forces. So one of the task forces is about digital tokens and security tokens. Will you please tell us a bit more about this task force? What is the outcome and what are the next steps here?
Mr. Kuhnel: As you said, we do within the ANNA association when we have specific files that we want to put more focus on, we will either create a task force as you mentioned, or specific working group to work on a dedicated analysis of that market developments. So, in the case of digital tokens, it is really a new area of financial asset and I’m keeping it linked to financial assets in this particular case. The world of tokens is developing very, very quickly. And there’s a lot of interest not just from market participants, but even now at the regulatory level to have this develop in an appropriate manner. Given that we have have numbering agencies and we have markets that are exploring the use of digital tokens, we felt that there was a need for us as the Association to create a task force to look at how we manage digital token identification for financial products or some securities and financial assets.
There is a new standard, as I mentioned, that is being created for Digital Token Identifiers. But the the DTI standard itself is much more comprehensive than just financial products. It’s also looking at utilities, cryptocurrencies, such as Bitcoin, and also non-financial digital tokens.
You could actually tokenize some artwork, pictures, real estate, etc. So, what we have been focusing on is maintaining the integrity of the ISIN and, ensuring again, it’s fit for purpose, and that financial products, be they digital tokens or conventional products, that they still should be able to be identified with an ISIN and and that has really been the work that we have been focused on is ensuring that the ISIN, as well, remains fit for purpose and covers all areas of the financial instruments.
Armenuhy: This will be very useful for the whole system.
Mr. Kuhnel: We hope, indeed, We hope our work is going to meet the needs of the marketplace.
Armenuhy: I personally waiting for the results of this. And let’s come back to some Association-related thing, not just projects. As ANNA and, as FEAS we also, we are doing meetings, we are for communication. So you cancelled two meetings that were planned for 2020 in Croatia and South Korea. How are you keeping the communication as your membership is very wide, and you have around 200 members? How are you keeping communication during this time without meeting each other?
Mr. Kuhnel: It’s a very good question. And it has been quite a challenging environment, not just within ANNA, but I’m sure for everyone who’s involved in. In the financial industry, the whole change of working from office to working from home and the inability to have, you know, the interpersonal connections that would normally come with meeting physically at various times of the year. So, it was quite disappointing for us to have to cancel not just one, but two of our general meetings. And these have always been key for us to use as the board to share information with the membership in terms of the work that the board and the various task forces and working groups have been doing. Also, for us to be able to seek decisions from the members.
So we’ve had to really modify the way we’ve been doing this, we still have a legal obligation to have general meetings twice a year. We need to continue to have those taking place. But what we’ve been doing is utilizing a proxy voting model, and using WebEx facilities to actually present the material to the members. That they’re able to be informed of what we are seeking votes on or approvals for through the general meeting.
It has been an effort of the Board to, sort of, adjust our ability to communicate. Now keep in mind, we are a global Association and we’re therefore we’re based and the numbering agencies are based all around the world. A lot of our communications and interactions during the course of the year are done electronically through emails and documents being sent. That has not changed. It’s really just the general meetings, we’ve had to adjust to a more electronic or digital format to continue to allow us to progress and make progress in terms of the files that we’re actively working on.
Armenuhy: Yeah, you are used to working at a distance. But anyway, the challenges are coming and how are you keeping the positiveness? How are you encouraging your staff to work, because working in a normal situation digitally, it is different than working amid pandemic?
Mr. Kuhnel: It’s also a very good point and I think it’s not just the challenge that ANNA faces but every organization has been facing as well with the pandemic that has been happening around the world. COVID often comes up on how we and our members have been impacted. And it’s been a need to just continue being transparent and using the tools that we have such as video, conferences, emails, phone calls, communicating through documents, but it’s really the need to keep the level of communication on an acceptable level, not just with the members, but as you said, also with the team that are working on this, not just the Secretariat and the two managing directors, but the Board members as well, ensuring that we have cohesion. We were all still focusing on the objectives of the Association. It’s been challenging, but I think we’ve done a good job in managing it, given the challenges we’ve had to face.
Armenuhy: Great. And I am following ANNA on different channels. The visibility is very good and news I’m really exciting during the year. I love your activities.
Mr. Kuhnel: Thank you.
Armenuhy: And the last question, Dan. In your personal opinion, what will life look like after the pandemic? And what other challenges will we face in the future?
Mr. Kuhnel: It’s an excellent question. And I’ll share my perception.
We went from a transition of being in the office to not being in the office from one day to the next. And I think in the financial industry, we were very, very lucky that we were able to continue to work in a relatively stable environment, with efficiency and using technology to our better advantage. But it was a very foreign concept at the beginning because no one had imagined that we would go from five days a week in the office to zero days in the week in the office and then never being in the office. And now we’re what, early December and we haven’t been formally in the office with our colleagues for a good eight, nine months now.
And if you look at what the government predictions are, that is set to continue for some time still. So we quickly had to adapt to the new reality.
I think, as I said, we were very fortunate that in the financial sector, we were able to really continue our business as usual, in a seamless manner and with resilience and efficiency. The government has responded very positively to try and assist with economic recovery packages. And this really put additional focus on the services that the financial industry provide, including the numbering agencies. There’s even more focus now on the need to have data quality and transparency and availability of that data, which is really the core of what the numbering agencies are doing.
Now, what will the new future look like in terms of work from home, I think that will now be the new norm and the job flexibility will be factored into future working models. The travel, which I used to be, as you may recall, an extensive traveler with my job. To go from traveling virtually weekly to traveling zero was quite an adjustment. But we’ve seen very good use of video conferencing meetings, some of the platforms that are available, have really improved the data, the quality of the resolution and the interaction, the stability, the network. All of this has really assisted in creating a better resilient and efficient environment. But we still need to get this pandemic under control to allow some sense of normality to return to people’s lives. And I really hope that everyone stays safe and continues to be healthy until we have a global vaccine that is available.
Armenuhy: Thank you, Dan. Thanks for your thoughts and thanks for joining me. Dan Kuhnel, Chairman of ANNA.
Mr. Kuhnel: Thank you.