Best Reference Data Initiative: SIX

Reference data has moved on from being mainly about taking a feed of instrument identifiers to encompassing new datasets needed for meeting regulatory initiatives, reporting requirements and improving operational efficiencies. In recent years, tax data management has become a hot reference data topic, and some vendors are now witnessing a growing demand for easily accessible and reliable information on tax rates for customers to use in pre- and post-trade processes. Considering complexities surrounding cross-border taxation and new tax transparency and reporting requirements, SIX’s skillful handling of tax data has landed it the award for Best Reference Data Initiative. 

The Swiss vendor, which prides itself on attention to detail and quality, intended to plug the gap in the market for a service to help asset and wealth managers identify the tax status of equity-linked instruments following the Inland Revenue Service’s (IRS’s) introduction of IRS 871(m) on January 1, 2017. 

Following the new regulation, certain equity-linked instruments are subject to withholding tax and tax reporting, and the challenge for firms is to identify which transactions are within the scope of IRS 871(m). “This was an opportunity for us to shine; it really plays to our strengths,” says Phil Lynch, head of markets, products and partners at SIX’s financial information business unit, who explains that SIX created a “plug‑and‑play” service to help firms. 

The scope of the regulation is increasing year-on-year, as more instruments are included and, to help customers overcome the data challenges, SIX launched an IRS 871(m) service, which covered more than 40,000 in-scope instruments by January 2018. The service benefits from global issuers providing data and withholding flags to SIX,
as well as the fact that it is building on SIX corporate actions. When using the SIX IRS 871(m) service, firms have access to classifications of instruments and are notified of dividend payments that require tax withholding or reporting under IRS 871(m).

The judges praised SIX for its “innovative use of data” and for creating “a platform to solve a specific problem facing clients.” They highlighted that “addressing regulation is still important,” and “the service that SIX has provided helps both banks and regulators.”

The IRS 871(m) service sits well with SIX’s current plans: “We’re looking at broadening our tax data services, and have over 30 to date,” says Lynch, adding that SIX is expanding its tax data offering. “As tax has a bigger impact on clients’ returns, we’re looking at [what] more we can do for clients.”

Read more about the IMD/IRD Awards 2018 winners