Annex 4. Security-by-Security Databases
- Jose Cartas, and Qi He
- Published Date:
- June 2015
What Is a Security-by-Security Database?
A4.1 A security-by-security (SBS) database is a microdatabase that stores statistics at an individual security level.1 Statistics are stored according to a range of attributes or characteristics that may vary depending on the purpose of the database. For statistical uses, the attributes may include the International Securities Identification Number (ISIN) (or the identification number according to some other schemes, since SBS databases cannot store securities without codes); the issuer’s name, residence, sector, and subsector; the issue date; redemption date; type of security; currency of denomination; issue price; redemption price; outstanding amount or market capitalization; and the coupon payments and dates (see Figure A4.1).
A4.2 The production of statistics from SBS databases can be presented as a three-stage process (see Figure A4.2).
Figure A.4.1Attributes of Statistics Stored in SBS Databases Figure A.4.2Stages in the Development of SBS Databases
First, statistics on individual securities are collected and purchased from a range of sources, such as central banks, government agencies, commercial data providers, and securities exchanges (data input).
Second, the individual security data collected from different sources are added to the database, merged, and stored. Checks for completeness, plausibility, and consistency are then performed and, where errors are detected, observations are corrected (data quality management).
Third, individual security data are stored according to various classification criteria.
Link to Securities Holdings Statistics
A4.3 SBS databases can be linked to securities holdings statistics for resident holders grouped by sector and subsector, as well as for nonresident holders. For that purpose, information provided by respondents is linked at the individual security level to the data stored in the SBS database. The link is often made using the ISIN, but also referring to information on the securities holders and holdings: (1) the holder by residence and institutional sector and subsector, and also by large and complex financial or nonfinancial groups; and (2) the amount of holdings in currency.
A4.4 At least two levels of access should be distinguished, namely access to raw data for statisticians and access to more aggregated data for users, for instance to compile sectoral financial accounts and financial balance sheets.
A4.5 Current reporting schemes on securities holdings are mainly based on two groups of agents having access to information on securities holdings: (1) custodians (as well as centralized securities depositories); and (2) direct reporters. In most cases, data are collected from custodians on an SBS basis. Data on the debt securities holdings of residents are also collected from nonresident custodians to allow the breakdown of holdings by the residence of the issuer to be estimated.
A4.6 Direct reporters provide SBS data on their holdings with various breakdowns: by type of instrument, maturity, and residence of issuer, for example. There may be a legal obligation in some countries for residents to report their securities held in custody abroad. However, there is usually a limited coverage of data collected directly from specific sectors or subsectors, like households and nonprofit institutions serving households (NPISHs).
A4.7 When deciding whether to construct an SBS database linked to securities holdings statistics, the full range of benefits and costs needs to be considered.
SBS Databases for Equity Securities
A4.8 SBS databases for equity securities are somewhat different from SBS databases for debt securities. Equity securities do not have a maturity date and there is no obligation on the issuer to pay the holder a predetermined amount.
A4.9 Maintaining an SBS database for equity securities may be challenging for various reasons. These relate predominantly to:
The compilation of market prices for listed shares, particularly multiple listings, and the procurement of up-to-date market prices from various (typically inconsistent) data sources, with a considerable impact in terms of resources (high data frequencies and resource-intensive inputting and quality management)
The establishment of hierarchical links between individual equity securities and the relevant depository receipts, as well as secondary/dual listings
The handling of deviating price formats (percentage prices) when valuing share positions (e.g., in the case of “Genußscheine,” also called “Genußrechte”)
The effective and timely integration of corporate events (e.g., capital increases/reductions, liquidations, and stock splits) into a micro-level database
The handling of unlisted shares in an SBS database, typically with limited information on outstanding shares and comparable prices from the various data sources.
A4.10 Statistics stored in SBS databases should enable each individual security to be identified and provide sufficient information to allow securities statistics to be compiled (e.g., the ISIN code, name and sector of the issuer, type of security, issue date). Moreover, information on certain parameters (e.g., the date of the initial public offering (IPO)/listing, details of previous issuance of bonus shares or stock splits, or historical information on dividends payable) may also be relevant for the purposes of monetary and fiscal policy, and financial stability analysis.
A4.11 Aggregated time series (i.e., equity securities issued by a given sector) can only be derived from an SBS database if time series for each individual security are available.
Benefits and Costs
A4.12 When deciding whether to construct an SBS database, the full range of benefits and costs should be considered. Most of the arguments for and against SBS databases relate to the compilers of securities statistics, although respondents and users are also affected.
A4.13 One of the main advantages of SBS databases is that compilers, rather than respondents, are responsible for the statistical classification of securities. This promotes accuracy and consistency of the data, and adherence to international statistical standards. For statistical purposes, particularly in cases of statistics on securities issues, government finance statistics, and institutional sector accounts, individual SBS issues data are usually aggregated according to various statistical categories. SBS databases offer the flexibility to produce different aggregates based on SBS data, with no need for any further data collection. Moreover, SBS databases allow data to be derived on positions, transactions, and other flows. SBS databases also allow quality checks at a very detailed level to detect outlier observations within specific statistical categories. Outliers may indicate a misclassification but they can also be caused by financial innovation, which would require further investigation and potentially an amendment to the statistical aggregation categories.
A4.14 SBS databases benefit respondents by reducing the amount of detailed breakdowns to be reported to compilers. Respondents no longer need to map their internal data into statistical reports and instead provide relevant information for each individual debt security in their database. A drawback for respondents, however, is the necessity to meet the data standards agreed upon with compilers.
A4.15 SBS databases can be extended to include information on securities holdings for resident holders grouped by sector and subsector, as well as for nonresident holders. For that purpose, the information provided by respondents is linked at the individual security level to the data stored in the SBS database. The link is often done by using the ISIN.
A4.16 From the user’s perspective, there may be interest in detailed disaggregated data or in combining different classifications, particularly as debt securities markets become more complex and globalized. SBS databases enable this decomposition in debt securities statistics. Sometimes a panel of individual securities data may be set up to analyze common developments. SBS databases also permit an analysis of the financing of different sectors, the size of different market segments, or the importance of different debt securities. The databases allow users to track changes in the credit ratings, prices, and liquidity of individual securities and issuers.
A4.17 SBS databases can, in conjunction with statistics on securities holdings, significantly improve the quality of monetary, financial, balance of payments, and international investment position statistics, as well as financial accounts and financial balance sheets. Such databases are also useful for the purpose of estimating revaluations and other changes in the volume of assets and liabilities by type of financial instrument. They can be used to construct detailed “from-whom-to-whom” tables providing important information on linkages within the economy and may also be required when collecting and compiling datasets for systemically relevant investors (e.g., large and complex financial groups). Confidentiality issues may have to be addressed where issuance and holdings of equity securities are presented with fairly detailed breakdowns (e.g., with details of securities held by central banks).
A4.18 At the same time, there are significant costs for compilers in setting up and maintaining SBS databases and adapting them to changes in users’ needs. Human, financial, and information technology resources need to be found. SBS databases are largely sourced from commercial database providers and there are administrative expenses related to setting up contracts with these providers for regular reporting or to conduct surveys. Acquiring this information is therefore expensive and it can often be incomplete. However, a minimum level of data quality is needed, such as a full coverage of specific categories of securities, and some manual intervention is necessary to crosscheck corresponding data received from the various data providers. Information technology costs for database storage and processing are significant. This reflects the complexity of SBS databases from an operational and methodological perspective, the large volumes of statistics stored in them, and database management costs shifting to compilers from respondents. Finally, there can be legal obstacles preventing data exchange between central banks, statistical agencies, and other authorities.
SBS databases may include statistics covering various categories of financial instrument, such as debt securities, equity securities, investment fund shares or units, and financial derivatives. A prominent example of an SBS database is the Centralised Securities Database (CSDB) set up by the European System of Central Banks (ESCB). The description of the CSDB in this annex is mainly based on ESCB’s experience.