[Editor’s note: This is a sidebar example to the main story on data classifications that you can read here.]

If you work in financial services, you may be familiar with the Classification for Financial Instruments (CFI), published by ISO in 2001.

Considering I have given several examples around classification of securities in my main story, it is useful to review this classification. Briefly, the CFI has two category levels and then four attributes. Each classification is represented by a six character code such as: ESRUFB (Equity, Common Shares, Restricted Voting, Freely Transferable, Full Paid, Bearer). The attributes may overlap in different branches of the classification.
In many respects, CFI covers several categories of financial instruments well. However, in my experience with several financial services firms, CFI is not used as widely as I would have expected. CFI is on the right track but needs attention in a number of areas. My intention is not to point out flaws in a very good piece of work but to highlight possible challenges you may face in your own classifications.

  • Updates to the classification have not been published in 10 years.
  • Some categories are arguably too narrow such as Rights and Preference Convertibles (very few securities fall in these categories).
  • Some categories are arguably too wide such as pools and baskets (this category is named “Unit trusts/mutual funds/OPCVM/OICVM”). Since 2001 the number of securities falling in this category has exploded, which could justify a further division.
  • Really this is a two level classification; why include attributes? Clearly securities possess far more than four attributes.  
  • This classification has the “Other” category.
  • There seems to be categories missing such as: repos, foreign exchange, vanilla swaps, and specific money market instruments such as CPs, CDs, TB, BAs, TDs.
  • Some attributes don’t seem like they would be used very often: Form (i.e. Registered, Bearer) and Purchase Rights (anti take over device).

The CFI would have benefited from fine tuning and improvements since 2001. Although some of the categories appear to be too wide or narrow in their definition, in 2001 it may have been fine.  The inclusion of attributes seems odd but may have been an attempt to provide more value to this two level classification.  An alternative approach might have been to establish a third level.  The message here is that decisions up front will certainly affect a classification’s adoption and usefulness.

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