Following the request at the Industry Consultation, the DSB examined the number of Corporate Default Swap Single Name (CDS SN) ISINs that were incorrectly created, specifically where the issuer type of the underlying bond did not match the DSB product template selected.

The objective was to assess the data quality of CDS Single Name products in the DSB with a view to determining next steps, including the use of alternative data sources in the event that error rates were unacceptably high.

An assessment of the data based on Instrument Type and Issuer Classification highlighted that the prevailing error rate was relatively low, with 0.02% of Corporate SN CDS and 2% of Sovereign SN CDS having incorrectly created OTC ISINs. i.e. 0.02% of OTC ISINs for Corporate SN CDS were created referencing an underlying Bond or LEI that was not Corporate, and 2% of all OTC ISINs created for Sovereign SN CDS had and underlying reference that was not a Sovereign Bond or LEI.

A discussion amongst PC Members and subsequent outreach to targeted DSB users indicate that the data mis-alignment was primarily a result of users not interpreting their own data correctly or setting automated procedures in error.

The DSB Product Committee wishes to remind users that they carefully monitor their use of the product templates to ensure data quality and consistency. In particular in case of the CDS Single Name templates, users are reminded to ensure that templates are utilized with due care so that the type of DSB Product Definition utilized when creating an OTC ISIN corresponds with the relevant type of underlying Bond or LEI. A reminder of the various types of CDS instruments for which OTC ISINs can be created is provided below for ease of reference.

A list of impacted OTC ISINs with incorrect underlying Bonds or LEIs is available on request. Please direct any queries on this topic to otc.data@anna-dsb.com.

Use of Non-Standard CDS Contract Type

The PC noted that the product template for “Non-standard CDS” should only be used to obtain and/or search for OTC ISINs that are not vanilla. Vanilla CDS instruments (including those with a non-standard contract type) should be created and/or searched for using standard CDS templates available e.g. Corporate, Sovereign, etc.

Published by: Malavika Solanki