Hedgd is of the opinion of the CFI that, given that he is within MiFID II and EMIR, he will therefore probably be needed in some way in the foreseeable future. The problem that many companies will have is to ensure that the right code is used and it can rely on a data provider for this information. That`s why we developed Hedgd Core and Hedgd OMS (Order Management System) to include instrument tetanus based on the CFI code model. I think this is a logical starting point for creating instrument classifications and, taking into account custom classifications for different purposes, it helps to solve the problem. Sometimes it`s not just about the representation of classifications; it can be how instruments and subsequent trades are modeled. For example, a retreat in one system is a contract with events and in another it could be an instrument that can have multiple trades. All these translations involve costs for the company that performs the translation. Global capital market participants using ISIN codes may not be able to quickly identify the nature of the instrument, which is why only one standard is used to classify financial instruments: CFI and FISN. CFI is the classification code for financial instruments.
It consists of six alphabetic characters. The first sign represents the category of financial instruments, the second for the group in the category and the last four for the key attributes of the group. FISN contains no more than 35 alphanumeric characters, of which: Retirement operations are generally considered safe investments, given that the security in question is a guarantee, which is why most agreements concern US Treasury bonds. As a money market instrument, a repo transaction is actually a short-term, guaranteed, interest-rate loan. The buyer acts as a short-term lender, while the seller acts as a short-term borrower. This will help meet both parties` funding and liquidity targets. For the party who sells the security and agrees to buy it back in the future, it is a repo; For the party at the other end of the transaction, which buys the security and agrees to sell in the future, this is a reverse retirement transaction. CFI codes also aim to simplify electronic communications between participants, to better understand the characteristics of financial instruments for investors and to allow a single grouping of securities for reporting and categorisation purposes.  MiFID II lists the instrument classes in RTS 28 for the best execution ratio and the use of a CFI code is provided for elsewhere in rts 22. While no world is far from the other, there is a level of interpretation that can be applied here. Some companies consider convertible bonds to be bonds and some consider them as equity. It`s not insurmountable, but it shows that the industry has had this problem for ages.
As already said, this often manifests itself in the integration of systems, internally or externally, and mapping often needs to be maintained. The classification of financial instruments (CFI) appears under MiFID II and EMIR and will therefore probably be necessary in some way in the near future. Oliver South, co-founder and CEO of Hedgd, describes the challenges facing financial services companies and how to ensure the right code is used. Robinhood. .