Debra Kuntz

Richard McGee Kenneth Aberbach

Brian Mullarkey Melissa Harris
April 14, 2004 James Greer
Dejana Neskovic
History and Use of Foreign
Portfolio Investment Data

Debra Kuntz
 Overview

 Part of an integrated system

 Used in conjunction with monthly flow data
 Annual data are detailed, but not timely
 Monthly data are very timely, but less precise
 Used together to create U.S. cross-border portfolio
investment statistics
3
 History

 Security-level data first collected in 1974

 Measured foreign investment in U.S. securities
 Congressional concern over growing foreign influence
 Existing TIC data collected monthly and quarterly, but
lacked detail

4
 History

 Security-level collections of foreign

holdings of U.S. securities data continued at
5-year intervals

 These were large, benchmark collections

with hundreds of reporters

5
 History

 Crisis of 1997-1998 caught most by surprise

 Lack of key data helped mask the problem
 Led to recognition that greater financial
transparency was required
 Implies higher quality and faster data needed
6
 Changes Required

 Lack of detailed, timely data on Reserve

Assets and External Debt positions
identified as major gaps

7
 Changes Implemented

 Improved Reserve Asset reporting operational

 IMF’s External Debt Reporting System (EDRS)
operational
 Countries are expanding collections and accelerating
publication of external debt data

8
 EDRS

 U.S. Government strongly supports the

system
 Greater transparency required in an integrated
world financial system
 Hopefully an early warning system
9
 EDRS

 Required many changes to the U.S. reporting system

 Annual security-by-security reporting implemented
in 2002
 Reporting in 4 out of every 5 years will be from the
largest reporters only
 Shorter submission periods

10
 EDRS

 Quarterly reporting of external debt, with a one

quarter lag, by sector (gov’t, bank, other) and type
of debt (bond, loan, etc.) required
 Forward debt repayment schedules strongly
encouraged
 Currency composition of debt also encouraged
11
 EDRS

 U.S. will augment reported data with estimated data

 Precise measurement would require quarterly security-by-
security collections
 Too much burden on reporter and compilers, therefore
annual data will be combined with monthly flow data

 Result = credible estimates

12
Institute of International Finance
Recommendations

 IIF strongly urged changes

 IIF recommended a more rigorous system than will
be implemented
 “…private sector participants in these markets bear
a responsibility for full and timely disclosure of
information on their activities.”
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 Users

 Financial industry analysts

 International organizations
 U.S. Government
 Academic research

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 Uses

 U.S. Government - BoP, IIP, country exposure

 Reduced net debtor position
 Current account sustainability

 Help to explain $US strength?

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 Uses

 Annual data provide more precise geography

 Monthly long-term securities report is based on

location of purchaser/seller

 Results in heavy bias towards financial centers

such as the United Kingdom

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 Uses

 Security-level collection allows for greater

data editing
 June 2002 data decreased estimated level of
foreign holdings by $130 billion
 Shows investment by Industry

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 Increasingly Important

 Foreign ownership increasing

 D Year Overall U.S. Treasuries

1974 4.8% 14.7%
 D
2002 12.2% 40.7%
 Securities flows now much greater than bank lending

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 Summary

 Changes have increased the burden on both

reporters and compilers
 By combining estimates with reported data we are
attempting to limit the burden
 Timely, accurate data from reporters is the key

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Who Must Report

Richard McGee
 Who Must Report

 All U.S.-resident entities that received a

copy of the instruction booklet are required
to complete and return Schedule 1.

 All U.S.-resident entities that meet or

exceed the exemption level are required to
file.

21
 Who Must Report

 Exemption Level
 The exemption level is determined on a
consolidated basis
 All areas of an organization must be taken into
consideration and their holdings aggregated
 Subsidiaries
 Affiliates
 Custodial business
 Foreign issuances
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 Who Must Report

 Exemption Level
 U.S.-resident entities must report detailed Schedule
2 information if the total fair market value of all
reportable U.S. securities owned by foreign
residents meets or exceeds $100 million.
 If your organization meets or exceeds the
exemption level and did not receive a copy of the
instruction booklet you are still required to file.

23
 Who Must Report

 Why did my organization receive a copy of the

instruction booklet?
 Reporters who filed Schedule 2s on the 2000 SHL and
the 2003 SHLA
 Issuers of bearer bonds
 TIC S and TIC B filers
 Agencies and GSEs
 Mutual funds
 Large privately held companies
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 Who Must Report

 Proper classification of U.S. and foreign

 Reporting organization
 Owners of securities
 Categories of reporters
 U.S.-resident custodians
 U.S.-resident central securities depositories
 U.S.-resident issuers

25
Proper Classification of U.S. and
Foreign
 Definition of United States
 The fifty states of the United States
 The District of Columbia
 The Commonwealth of Puerto Rico
 American Samoa, Baker Island, Guam, Howland
Island, Jarvis Island, Johnston Atoll, Kingman Reef,
Midway Island, Navassa Island, Northern Mariana
Islands, Palmyra Atoll, U.S. Virgin Islands, and Wake
Island

26
 Proper Classification of U.S. and
Foreign

 Definition of U.S. resident

 Any individual, corporation, or other entity located in the
United States, including :
 branches

 subsidiaries

 foreign entities located in the United States.

27
 Proper Classification of U.S. and
Foreign

 International and regional organizations are

foreign residents, even if located in the United
States
 IBRD; World Bank
 Inter-American Development Bank (IADC)
 International Finance Corporation (IFC)
 Appendix D of instructions provides a partial list
 www.treas.gov

28
Proper Classification of U.S. and
Foreign

 Corporations incorporated in the United States are

U.S. residents even if they have no “physical
presence” in the United States.

 Country where legally incorporated, otherwise

legally organized, or licensed determines residency

29
 Proper Classification of U.S. and
Foreign
 How to determine residency
 Citizenship does not determine residency
 Tax forms
 W-8 forms are filed by foreign residents

 W-9 forms are filed by U.S. residents

 Mailing address

30
 Proper Classification of U.S. and
Foreign
 Examples of U.S.  Examples of non-U.S.
residents residents
 Bayerische Landesbank  Bank of New York
NY Branch Tokyo Branch
 BP America Inc.  BP p.l.c.
 General Motors  GMAC Canada
Corporation (includes  International Bank for
GMAC) Reconstruction and
 KfW International Development (IBRD;
Finance, Inc. World Bank)

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 Proper Classification of U.S. and
Foreign
 Reporting organization
 Report all U.S. securities issued directly to
foreigners (that is, no U.S.-resident custodian is
used) by all U.S.-resident parts of your organization
 U.S.-resident branches
 U.S.-resident offices
 U.S.-resident subsidiaries

32
 Proper Classification of U.S. and
Foreign

 Holders of securities
 Non-U.S.-resident clients
 Non-U.S.-resident custodians
 Non-U.S.-resident central securities depositories
 Non-U.S-resident parts of your organization

33
 Categories of Reporters

 U.S.-resident custodians

 U.S.-resident entities that hold in custody or manage

the safekeeping of U.S. securities for foreign residents,
including foreign-resident custodians and central
securities depositories.

34
 Categories of Reporters

 Each U.S.-resident custodian should file

one consolidated report for:
 The custody accounts for which safekeeping services
are provided
 Their own U.S. securities held directly by foreign
residents

35
 Categories of Reporters

 U.S.-resident custodians should exclude

securities held in custody by their foreign-
resident affiliates or subsidiaries.

 U.S.-resident affiliates or subsidiaries of

foreign-resident custodians should exclude
securities held by their foreign parent.

36
 Categories of Reporters

 Schedule 2 reporting:
 U.S.-resident custodians should report all U.S. securities held in
custody for foreign residents and securities they are safe keeping for
foreign-resident custodian.

 U.S.-resident custodians should report all U.S. securities that are

settled and cleared through foreign central securities depositories
(e.g., Euroclear)

37
 Categories of Reporters

 U.S.-resident central securities depositories

 U.S.-resident central securities depositories should report
all U.S. securities they hold in custody or manage the
safekeeping of directly on behalf of foreign-resident
entities.

38
 Categories of Reporters

 U.S.-resident issuers
 Entities whose securities are held directly by foreign
residents, with no U.S.-resident custodian or central
securities depository involved.

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 Categories of Reporters

 Each U.S.-resident issuer should file one

consolidated report for:
 Securities issued by the reporter’s U.S.-resident
subsidiaries, branches, and affiliates

 Their custody holdings for foreign residents

40
 Categories of Reporters

 U.S.-resident issuers should exclude

securities issued by foreign affiliates or
subsidiaries.

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 Who Must Report

A U.S.-resident issuer clears and settles

through a foreign central securities
depository
U.S.-Resident Foreign Central
Issuer Securities Depository

Files Schedules 1 and 2 Does not report

42
 Who Must Report

A foreign-resident investor employs a

foreign-resident custodian
U.S.-Resident Foreign-Resident
Issuer Custodian

Files Schedules 1 and 2 Does not report

43
 Who Must Report

A U.S.-resident custodian holds securities for a

foreign resident

Foreign-Resident U.S.-Resident
Custodian Custodian

Foreign Resident Files Schedules 1 and 2

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 Who Must Report

Flow Chart for Bearer Bonds

Foreign
Resident

U.S.-Resident U.S.-Resident
Issuer Custodian

Files Schedules 1 and 2 Files Schedules 1 and 2

FRBNY eliminates duplicate reporting
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What Must be Reported
on the
Report of Foreign Holdings of U.S.
Securities, Including Selected Money
Market Instruments (SHL)

Brian Mullarkey
 U.S. Securities

 Securities issued by U.S. entities, including:

 U.S.-resident entities
 U.S. subsidiaries of foreign entities
 U.S. branches of foreign banks

47
 U.S. Securities

Exclude securities issued by International

and Regional Organizations - Appendix D

Exclude securities issued by companies

reincorporated outside the United States

48
 U.S. Securities

 Information that does not contribute to

determining if a security is U.S.:
 place of issue or location of trades
 currency of issue
 nationality of parent organization
 guarantor

49
 U.S. Securities
Example 1

 Euro denominated 2-year note issued by a

Daimler Chrysler affiliate incorporated in
the United States.

 Is this security reportable?

50
 U.S. Securities
Example 1 Answer
 Euro denominated 2-year note issued by a
Daimler Chrysler affiliate incorporated in
the United States.

 Is this security reportable?

 Yes. The security was issued by a

U.S.-resident entity.
51
 U.S. Securities
Example 2

 U.S. dollar-denominated 30-year Yankee

bond issued by the Inter-American
Development Bank.

 Is this security reportable?

52
 U.S. Securities
Example 2 Answer

 U.S. dollar-denominated 30-year Yankee bond

issued directly by the Inter-American Development
Bank.

 Is this security reportable?

 No. This security was issued by a Regional

Organization considered to be a foreign-resident
entity.

53
 U.S. Securities
Example 3

 U.S. dollar-denominated asset-backed

security issued by Company B incorporated
in Hong Kong and guaranteed by the
parent, Company A, incorporated in the
United States.

 Is this security reportable?

54
 U.S. Securities
Example 3 Answer
 U.S. dollar-denominated asset-backed security issued
by Company B incorporated in Hong Kong and
guaranteed by the parent, Company A, incorporated in
the United States.

 Is this security reportable?

 No. This security was issued by a foreign-resident

entity. The location of the guarantor does not factor
into the decision of whether the security is foreign or
not.
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 Type of Reportable U.S.
Securities

 Equity
 Short-Term Debt
 Long-Term Debt
 Asset-Backed Securities

56
 Equity

 Instruments representing an ownership

interest in U.S.-resident organizations.

 However, ownership interests representing

direct investment are not reported.

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 Equity
Direct Investment

 Direct investment is defined as ownership

or control of 10% or more of an
organization’s voting stock.

58
 Equity

 Reportable equity securities include:

 common stock
 preferred stock
 restricted stock
 shares/units in U.S.-resident funds
 shares/units in unincorporated business
enterprises, such as limited partnerships

59
 Equity
U.S.-Resident Funds
 Report foreign residents’ ownership of shares/units
of funds legally established in the United States as
equity.
 Examples of funds:
 closed-end and open-end mutual funds
 real estate investment trusts
 money market funds
 index-linked funds
 investment trusts
 exchange traded funds
60
 Equity
U.S.-Resident Funds

 Classification of the fund as “U.S.” is not based on

the securities that the fund invests in.
 Example:
 A fund organized in New York that only purchases
Japanese Treasury securities is a U.S.-resident fund.
 A fund organized in Japan that only purchases U.S.
Treasury securities is a foreign-resident fund.

61
 Funds

 Report U.S. securities owned by foreign-

resident funds.

 Ownership of shares of foreign-resident

funds is excluded, however, the U.S.
securities owned by these funds are
reportable.

62
 Equity Exclusions

 Exclude from equity:

 convertible debt - reported as debt instead
 depositary receipts if the underlying security is
issued by a foreign resident
 securities issued by companies incorporated
outside of the United States as of June 30, 2004
 ownership that represents general partner
interests
63
 Short-Term and Long-Term Debt
(excluding asset-backed securities)

 Instruments that usually give the holder the

unconditional right to financial assets.

64
 Term

 Determine term, (short-term or long-term),

based on the original maturity of the security.
 Original maturities of one year or less are
short-term.
 Original maturities of greater than one year
are long-term.

65
 Term

 Debt with multiple call options (multiple

maturity dates) is long-term if any of the
maturity dates is greater than one year from
the date of issue.
 Perpetual debt is long-term.

66
 Term Examples

 A U.S. Treasury bill issued on February 15,

2004 and matures on November 15, 2004 is
short-term.

 A U.S. 30-year bond that matures on

March 26, 2005 is long-term.

67
 Short-Term Debt
 Reportable short-term debt includes the
following instruments where the original
maturity is one year or less:
 commercial paper - including asset-backed
commercial paper
 negotiable certificates of deposit, bank notes and
deposit notes
 U.S. government securities (e.g., U.S. Treasury
bills)
 bankers’ and trade acceptances
68
 Long-Term Debt

 Reportable long-term debt includes the following

instruments where the original maturity is greater than
one year:
 bonds
 notes
 debentures
 convertible debt
 zero coupon securities
 stripped securities
 negotiable certificates of deposit
69
 Long-Term Debt
Stripped Securities

 Reportable stripped securities are those

where the issuer of the stripped security is a
U.S.-resident entity.
 Residency of the stripped security is not
determined by the issuer of the underlying
security.

70
 Long-Term Debt
Stripped Securities

 U.S. securities that are the underlying securities for

stripped securities should be reported if held by a
foreign resident.

 Stripped securities issued by a foreign-resident entity

should not be reported, even if the underlying
security is U.S.

71
 Long-Term Debt
Stripped Securities Example

 U.K. Company A owns $100 million of U.S. bonds.

U.K. Company A issues stripped securities where
these U.S. bonds are the underlying securities. U.S.
Company B purchases these stripped securities.

 What should be reported by the U.S. custodians for

Company A and Company B?

72
 Long-Term Debt
Stripped Securities Example Answer
 U.K. Company A owns $100 million of U.S. bonds.
U.K. Company A issues stripped securities where these
U.S. bonds are the underlying securities. U.S.
Company B purchases these stripped securities.

 What should be reported by the U.S. custodians for

Company A and Company B?

 Company A’s U.S.-resident custodian reports the $100

million of U.S. bonds. The stripped securities are not
reported. 73
 Additional Issues

 Bearer Bonds as a single Global Certificate

 Matured Bonds that have not paid off

74
 Debt Exclusions

 Exclude from short-term and long-term debt:

 shares/units in U.S.-resident funds, even if the U.S.
fund invests in debt.

 investments in U.S.-resident funds are reported, but

should be classified as equity on this report.

75
 Debt Exclusions

 Exclude from short-term and long-term

debt:
 derivatives
 loans
 letters of credit
 non-negotiable certificates of deposit
 demand deposits

76
 Debt Exclusions

 Exclude from short-term and long-term

debt:
 asset-backed securities

 these securities are reported, but should be

classified as asset-backed securities on this
report.

77
 Asset-Backed Securities

 Securitized interest in a pool of assets,

which give the purchaser a claim against the
cash flows generated by the underlying
assets.

78
 Asset-Backed Securities

 Reportable asset-backed securities are those

where the issuer securitizing the assets is a
U.S. resident.

 The underlying asset is not a factor in

determining whether the ABS is a U.S.
security.

79
 Asset-Backed Securities

 Reportable asset-backed securities include:

 collateralized mortgage obligations (CMOs)
 collateralized bond obligations (CBOs)
 collateralized loan obligations (CLOs)
 collateralized debt obligations (CDOs)

80
 Asset-Backed Securities

 Reportable asset-backed securities include:

 other securities backed by:
 mortgages
 credit card receivables
 automobile loans
 consumer and personal loans
 commercial and industrial loans
 other assets
81
 Asset-Backed Securities
Exclusions
 Exclude from asset-backed securities:
 asset-backed commercial paper
 securities backed by a sinking fund
 These securities are reported but should be
classified as short-term or long-term debt on this
report.

82
 Repurchase Agreements
Security Lending Arrangements

 Repurchase agreements/securities lending

arrangements and reverse repurchase
agreements/securities borrowing
arrangements involve the temporary
transfer of a security for cash or another
security.

83
 Repurchase Agreements
Security Lending Arrangements

 The security lender should report the U.S.

security as if no repo or security lending
arrangement occurred.
 The security borrower should exclude the
U.S. security.

84
Review of Schedules

Dejana Neskovic
 Review of Schedules
Schedule 1

 Schedule 1: Reporter Contact Identification

and Summary Financial Information
 Required to be filed by all entities who receive
the report
 Contains basic information about the institution
 Contains summary financial information
reported on Schedule 2

87
 Review of Schedules
Schedule 1

 Reporter Identification Number (Line 1)

 10 digit number, including leading zeros, issued
by FRBNY.
 Contact FRBNY staff at (212) 720-6300 or at:
[email protected] if you do not know
your identification number.

88
 Review of Schedules
Schedule 1
 Reporter Type (Line 4):
 8 categories
 Choose the classification code that best
describes your entity.
 If two or more codes are appropriate, choose
the one that represents the largest portion of
your entity’s day-to-day operations.

89
 Review of Schedules
Schedule 1
 Reporter Type (Line 4):
 Bank: Depository Institution (i.e., an institution that
takes deposits) or a bank holding company.
 Other Financial Organization: Entity that acts as a
financial intermediary, such as a finance company or
broker/dealer, which is operated separately from an
entity in one of the other categories listed.
 Non-Financial Organization: An entity that conducts
commercial, industrial or trade activities.
 Other: Use this code if none of the categories listed
describe your firm. 90
 Review of Schedules
Schedule 1

 Name of Service Provider or Vendor

Used (Line 10)
 Service Provider/Vendor is an institution that
provides your data or prepares the electronic
submission of your report.

91
 Review of Schedules
Schedule 1

 Technical Contact (Lines 11-14)

 Provide the name of the person who can be
contacted for technical issues regarding the
electronic submission of your report.
 This person should be familiar with the file
formats used and how the data was extracted
from your databases or applications.

92
 Review of Schedules
Schedule 1
 Summary of Schedule 2 Information (Lines 15-19)
 Total number of Schedule 2 records
 Total US$ fair (market) value of all equity
 Total US$ fair (market) value of all short-term debt
 Total US$ fair (market) value of all long-term debt
 Total US$ fair (market) value of all ABS

93
 Review of Schedules
Schedule 1

 Certifier Information and Signature

 Someone from within your organization must
sign the Schedule 1 certifying its accuracy.
 If the data was prepared by a third-party vendor,
someone within your organization is responsible
for certifying your data submission.

94
 Review of Schedules
Schedule 2

 Schedule 2: Details of Securities

 Provides specific description and numerical
information of each U.S. security
 Total of all Schedule 2 US$ fair (market)
values should equal the summary financial
information reported on Schedule 1

95
 Review of Schedules
Schedule 2
 Sequence Number (Line 2)
 Sequence numbers should be sequential
(i.e., 1,2,3) by reporting unit for each
Schedule 2 record submitted.
 If multiple divisions of an organization are
preparing Schedule 2 records and it is
burdensome to create sequential sequence
numbers for the consolidated report, then each
reporting unit should have unique sequence
numbers.
96
 Review of Schedules
Schedule 2
 Reporting Unit Code and Name (Lines
3&3a)
 If data is being collected from multiple databases
or reporting systems, report the internal code
used in your organization to identify the database
or system.
 Enter a description or name of the reporting unit
or division that is reporting the information.

97
 Review of Schedules
Schedule 2
 Security ID Fields (Lines 5&6)
 Security ID: The security ID code used to
identify the reported security.
 CUSIP and ISIN codes are strongly preferred.
 Security ID System: Enter the appropriate code
that describes the Security ID. For example, if
the security ID is an ISIN, code 2 should be
entered in this field.
98
 Review of Schedules
Schedule 2

 Type of Issuer (Line 9)

 United States Department of the Treasury
(code 1)
 Other Federal agency or federally sponsored
enterprise (code 2)
 State or local government, including their
subdivisions (code 3)
 Other (code 4)
99
 Review of Schedules
Schedule 2
 Security Type (Line 10)
 Equity securities are broken out into the
following categories:
 Common Stock (code 1)
 Preferred Stock (code 2)
 Fund Shares (code 3)
 All other equity (code 4)

100
 Review of Schedules
Schedule 2
 Security Type (Line 10)
 Short and Long-term debt (excluding ABS) are
broken out into seven categories:
 Commercial Paper (code 5)
 Negotiable CD (code 6)
 Convertible Debt Security (code 7)
 Zero-Coupon Bond or Note (code 8)
 Bond or Note, unstripped (code 9)
 Bond or Note, stripped (code 10)
 All Other Debt (code 11) 101
 Review of Schedules
Schedule 2

 Security Type (Line 10)

 Asset-Backed Securities have been broken out
into their own separate code (code 12)

102
 Review of Schedules
Schedule 2
 Registered/Bearer Indicator (Line 11)
 If a security is a registered instrument (e.g., a
bond that is recorded in the name of the holder),
it should be reported with a registered indicator
(code 1).
 If a security is a bearer instrument, (i.e.,
possession of the bond certificate is the only
proof of ownership), it should be reported with
a bearer indicator (code 2).
103
 Review of Schedules
Schedule 2
 Country of Foreign Holder (Line 14)
 Identifies the location of the beneficial owner of
the security or its custodian.
 Type of Foreign Holder (Line 15)
 An abbreviated list of Foreign Official
Institutions can be found in Appendix D of the
instructions.
 A complete list can be found on the Treasury
website at www.treas.gov/tic/forms.htm.
104
 Review of Schedules
Schedule 2
 US$ Fair (Market) Value of Foreign Held U.S. Security
(Line 16)
 Report the US$ fair (market) value of securities as of
close of business on June 30, 2004.
 Fair (Market) Value in Currency of Denomination of
Foreign Held U.S. Security (Line 16a)
 Enter the fair (market) value of the security in the
currency of original issue.
 If the currency is denominated in US$ then enter the US$
fair (market) value.
105
 Review of Schedules
Schedule 2
 If US$ Fair (Market) Value is Zero (Line 17)
 If the fair (market) value is determined to be
zero, list the reason why on the appropriate
line. Examples of zero fair (market) value are:
 Securities that are thinly or never traded
 Stock is impaired or security in default
 Entity that issued the security is in receivership

106
 Review of Schedules
Schedule 2

 Reporting an Equity Security

 Security type must be either 1, 2, 3, or 4
 Number of Shares (line 18) must be provided
 Line items 19 through 25 pertain to debt
securities and should be left blank or null

107
 Review of Schedules
Schedule 2
 Reporting a Debt Security Other than ABS
 Security type must be either 5, 6, 7, 8, 9, 10, or 11
 The face value in the currency of denomination (line
19) must be reported
 Face value should be rounded to the nearest whole
currency unit
 If the security is traded in units, report the face value
by multiplying each unit by the number of units held
 An issue date and maturity date must be reported
108
 Review of Schedules
Schedule 2
 Reporting an Asset-Backed Security
 Security type must be 12
 The original face value in the currency of denomination (line 22)
must be reported
* Original face value is the amount that would still be outstanding if no
principal had been repaid
 Remaining principal outstanding in currency of denomination
must be reported (line 23)
* The remaining principal outstanding will only equal the original face
value if no principal has been repaid

109
How We Review Your Data

Kenneth Aberbach
 Three Levels of Review

 Reporter level
 Analyzing your data for reasonability
 Trend analysis
 Security level
 Comparing attributes of reported securities to one
another, and to commercial data sources.
 Macro level
 Additional comparisons on a broader level

111
 FRBNY Calculations

 Based on reported market value and quantity

fields, FRBNY calculates:
 Implicit Prices
 Factor Values
 Exchange Rates
 These calculations assist us in determining the
quality of your reported market values and
quantities.
112
 FRBNY Price Calculations
(from Schedule 2)
 Equity Example: If the US$ Fair (Market) value is $10
million, and the number of shares is 100,000, what is the
implicit price?

Implicit Price = US$ Fair (Market) Value (line 16)

Number of Shares (line 18)

Implicit Price =

113
 FRBNY Price Calculations
(from Schedule 2)
 Equity Example: If the US$ Fair (Market) value is $10 million,
and the number of shares is 100,000, what is the implicit price?

Implicit Price = US$ Fair (Market) Value (line 16)

Number of Shares (line 18)

Implicit Price = $10,000,000 (Market Value) = 100,000 shares

114
 FRBNY Price Calculations
(from Schedule 2)
 Equity Example: If the US$ Fair (Market) value is $10 million,
and the number of shares is 100,000, what is the implicit price?

Implicit Price = US$ Fair (Market) Value (line 16)

Number of Shares (line 18)

Implicit Price = $10,000,000 (Market Value) = $100 per share

100,000 shares

115
 FRBNY Price Calculations
(from Schedule 2)
 Non-ABS Debt Example: If the Fair (Market) value in currency
of denomination is $1 million, and the face value in currency of
denomination is $900,000, what is the implicit price?

Implicit Price =
Fair (Market) Value in Currency of Denomination (line 16a) Face
Value in Currency of Denomination (line 19)

Implicit Price =

116
 FRBNY Price Calculations
(from Schedule 2)
 Non-ABS Debt Example: If the Fair (Market) value in currency of
denomination is $1 million, and the face value in currency of
denomination is $900,000, what is the implicit price?

Implicit Price =
Fair (Market) Value in Currency of Denomination (line 16a) Face Value
in Currency of Denomination (line 19)

Implicit Price = $1,000,000 (Market Value) =

$900,000 (Face Value)

117
 FRBNY Price Calculations
(from Schedule 2)
 Non-ABS Debt Example: If the Fair (Market) value in currency of
denomination is $1 million, and the face value in currency of
denomination is $900,000, what is the implicit price?

Implicit Price =
Fair (Market) Value in Currency of Denomination (line 16a) Face Value in
Currency of Denomination (line 19)

Implicit Price = $1,000,000 (Market Value) = 1.11

$900,000 (Face Value)

118
 FRBNY Price Calculations
(from Schedule 2)
 Asset-Backed Securities Example: If the Fair (Market) value in
currency of denomination is ¥100,000, and the remaining principal
outstanding in currency of denomination is ¥110,000, what is the
implicit price?

Implicit Price =
Fair (Market) Value in Currency of Denomination (line 16a)
Remaining Principal Outstanding in Currency of Denomination (line 23)

Implicit Price =

119
 FRBNY Price Calculations
(from Schedule 2)
 Asset-Backed Securities Example: If the Fair (Market) value in currency
of denomination is ¥100,000, and the remaining principal outstanding in
currency of denomination is ¥110,000, what is the implicit price?

Implicit Price =
Fair (Market) Value in Currency of Denomination (line 16a)
Remaining Principal Outstanding in Currency of Denomination (line 23)

Implicit Price = ¥100,000 (Market Value) =

¥110,000 (Remaining Principal)

120
 FRBNY Price Calculations
(from Schedule 2)
 Asset-Backed Securities Example: If the Fair (Market) value in currency
of denomination is ¥100,000, and the remaining principal outstanding in
currency of denomination is ¥110,000, what is the implicit price?

Implicit Price =
Fair (Market) Value in Currency of Denomination (line 16a)
Remaining Principal Outstanding in Currency of Denomination (line 23)

Implicit Price = ¥100,000 (Market Value) = .909

¥110,000 (Remaining Principal)

121
 FRBNY Price Calculations
(from Schedule 2)
 Equity: US$ Fair (Market) Value (line 16)
Number of Shares (line 18)

 Debt (Non-ABS): Fair (Market) Value in Currency of Denomination (line

16a) Face Value in Currency of Denomination (line 19)

 ABS : Fair (Market) Value in Currency of Denomination (line 16a)

Remaining Principal Outstanding in Currency of Denomination (line 23)

122
 FRBNY Factor Calculations
(from Schedule 2)
 Factor Value Example: If the original face value in currency of
denomination is £900,000, and the remaining principal
outstanding in currency of denomination is £700,000, what is the
implicit factor value?

Factor Value =
Remaining Principal Outstanding in Currency of Denomination (line 23)
Original Face Value in Currency of Denomination (line 22)

Factor Value =

123
 FRBNY Factor Calculations
(from Schedule 2)
 Factor Value Example: If the original face value in currency of
denomination is £900,000, and the remaining principal outstanding
in currency of denomination is £700,000, what is the implicit factor
value?

Factor Value =
Remaining Principal Outstanding in Currency of Denomination (line 23)
Original Face Value in Currency of Denomination (line 22)

Factor Value = £ 700,000 £ 900,000

124
 FRBNY Factor Calculations
(from Schedule 2)
 Factor Value Example: If the original face value in currency of
denomination is £900,000, and the remaining principal outstanding in
currency of denomination is £700,000, what is the implicit factor
value?

Factor Value =
Remaining Principal Outstanding in Currency of Denomination (line 23)
Original Face Value in Currency of Denomination (line 22)

Factor Value = £ 700,000 = 0.78

£ 900,000
125
FRBNY Exchange Rate Calculations
(from Schedule 2)
 Exchange Rate Example: If the US$ Fair (Market) value is
$100,000 and the Fair (Market) value in currency of
denomination is £85,000, what is the exchange rate?

Exchange Rate =
US$ Fair (Market) Value (line 16)
Fair (Market) Value in Currency of Denomination (line 16a)

Exchange Rate =

126
FRBNY Exchange Rate Calculations
(from Schedule 2)
 Exchange Rate Example: If the US$ Fair (Market) value is $100,000
and the Fair (Market) value in currency of denomination is £85,000,
what is the exchange rate?

Exchange Rate =
US$ Fair (Market) Value (line 16)
Fair (Market) Value in Currency of Denomination (line 16a)

Exchange Rate = $100,000 =

£85,000

127
FRBNY Exchange Rate Calculations
(from Schedule 2)
 Exchange Rate Example: If the US$ Fair (Market) value is $100,000
and the Fair (Market) value in currency of denomination is £85,000,
what is the exchange rate?

Exchange Rate =
US$ Fair (Market) Value (line 16)
Fair (Market) Value in Currency of Denomination (line 16a)

Exchange Rate = $100,000 = 1.18

£85,000

128
 Reporter Level Review
Reasonability Comparisons
 Schedule 1 -vs- Schedule 2 comparison
 Schedules 1 and 2, comparison to prior year
(reporting trends, if you’ve reported in prior
years)

129
 Reporter Level Review
Reasonability Analysis
 Ensuring all Schedule 2 data fields were reported.
These data must include:
 Security ID
 Country of foreign-resident holder
 Type of foreign holder (Official or Other)
 Number of shares held by foreign residents (equity)
 Face Value held by foreign residents (non-ABS debt)
 Remaining principal outstanding held by foreign
residents (ABS)
130
 Reporter Level Review
Reasonability
 Currency/Exchange Rate Analysis
 Currency is US$ but US$ Fair (Market) Value (item 16)
does not equal the Fair (Market) Value in currency of
denomination (item 16a).
 Currency is not US$ and the exchange rate is not 1, but
the US$ Fair (Market) Value equals the Fair (Market)
value in currency of denomination.
 For each security, an implicit exchange rate is calculated.

131
 Reporter Level Review
Reasonability
 Country of foreign holder
 Country of foreign holder is U.S.
 Are these coded incorrectly or should these have been
excluded from your report?
 Are securities held by international and regional
organizations reported with the U.S. as the country of
foreign holder? If so, the the Country of Foreign Holder
code should be revised.
 Are securities held in a U.S. protectorate (Puerto Rico,
etc.)? If so, exclude from report.
132
 Reporter Level Review
Reasonability
 Country of foreign holder
 Country of foreign holder is Canada
 Has the amount of U.S. securities held by Canadian
investors changed substantially since the last reporting
cycle?
 Were Canadian-held securities coded as U.S.-held
securities on your system and so were incorrectly
excluded from your report?

133
 Reporter Level Review
Reasonability
 Bearer Bonds
 Does your institution issue any bearer bonds?
 All bearer bonds outstanding should be reported.
 Country of foreign holder code 88862 (country unknown)
should be reported for bearer bonds if the country of
foreign holder cannot be determined.
 We compare your reported bearer bonds to a list of known
outstanding bearer bonds provided to the Federal Reserve
Bank of New York by the Bank for International
Settlements (BIS).
134
 Reporter Level Review
Reasonability
 Key Securities Analysis
 Largest foreign-held securities by US$ Fair
(Market) value
 Implicit exchange rates, implicit prices, country of
foreign holder, etc.
 Securities reported with zero quantities
 If reported correctly, these securities do not need to
be reported, and should be excluded from future
reports.
135
 Reporter Level Review
Reasonability
 Reporter Queries
We focus on areas that were reporting problems in
prior data submissions, such as:
 keywords in descriptions, such as “rights,” “warrants,”
“repurchase,” “repo,” etc. (should not be reported)
 debt prices far above par
 invalid countries of foreign holder
 issue dates after as-of date
 additional comparisons to other reporters’ data (e.g.,
implicit prices) 136
 Reporter Level Review
Reasonability
 Consistency of data reported throughout the reporter’s
submission
 Example: You report data for Stock A with two
different implicit prices, which is correct?
 Stock A reported with implicit price of $55.00
 Stock A reported with implicit price of $65.00

137
 Security Level Review
 Data embedded in the security description, e.g., security type
or maturity date, are compared to data in the relevant fields.

 Term of debt is calculated using issue and maturity dates and

compared to the reported term and the security description.

 Issuer should not be a foreign resident.

 Reincorporated organizations should not be reported.

 Total quantity reported across all reporters is compared to the

total amount outstanding for a given security.
138
 Macro Level Review
Comparisons of various “cuts” of the
aggregate data.
 Equity by country and security type
 Long-term debt by country and currency
 Short-term debt by country and currency
 Long-term debt by country and type of security
 Short-term debt by country and type of security
 Debt by maturity date
139
Report of Foreign Holdings of
U.S. Securities (SHL)/TIC
Comparison
 Reports Used for Comparison

 Foreign Holdings of U.S. Securities (SHL)

 TIC Reports
 TIC BL-2 Customer Liabilities
 TIC BQ-2 Customer Liabilities denominated in foreign
currency
 http://www.ustreas.gov/tic/

141
 Differences

 TIC - Face Value

 SHL - Face Value and Market Value.

 TIC - Aggregate per country

 SHL - Detailed information on each security

142
 Differences

 TIC - USD or USD equivalent

 SHL - Market Value in both USD and currency of
denomination. Face value in currency of denomination
that FRBNY converts to USD.

143
 Differences

 There may be more than one TIC report

filed per institution.
 One consolidated SHL report filed per
institution
 For example: A U.S. entity sends in separate TIC
reports for the Bank Holding Company, Bank, and
Broker/Dealer but would send in one consolidated SHL
report.

144
 Compare - Overview

 Treasury Securities  Agency Securities

 Negotiable Securities  Foreign Currencies

 Negotiable CDs  Negotiable Securities

Issued

145
 Compare
Treasury Securities
 SHL (per country)  TIC BL-2 (per
 Type of Issuer = 1 (Item 9) country)
 Term Indicator = 1(Item  Short-Term U.S. Treasury
12) Obligations to Foreign
 Currency = USD (Item 13) Official Institutions
 Type of Foreign Holder = 1 (column 1)
(Item 15)
 Sum of face value (Item 17)

146
 Compare
Treasury Securities
 SHL (per country)  TIC BL-2 (per
 Type of Issuer = 1 (Item 9) country)
 Term Indicator = 1(Item  Short-Term U.S. Treasury
12) Obligations to Foreign
 Currency = USD (Item 13) Banks and all Other
 Type of Foreign Holder = 2 Foreigners (column 4 + 7)
(Item 15)
 Sum of face value (Item 17)

147
 Compare
Negotiable Securities
 SHL (per country)  TIC BL-2 (per
 Type of Issuer = 2, 3, and 4
(Item 9)
country)
 Security Type 5, 6, 7, 8, 9, 10,
 Negotiable CDs and Short-
11, and 12 (Item 10) Term Negotiable Securities
 Term Indicator = 1 (Item 12) to Foreign Official
(Security Type 6 includes Term Institutions (column 2)
Indicator = 2)
 Currency = USD (Item 13)
 Type of Foreign Holder =1
(Item 15)
 Sum of face value (Item 17 or
item 22 for ABS)

148
 Compare
Negotiable Securities
 SHL (per country)  TIC BL-2 (per
 Type of Issuer = 2, 3, and 4
(Item 9)
country)
 Security Type 5, 6, 7, 8, 9, 10,
 Negotiable CDs and Short-
11, and 12 (Item 10) Term Negotiable Securities
 Term Indicator = 1(Item 12) to Foreign Banks and all
(Security Type 6 includes Term Other Foreigners
Indicator = 2) (column 5 + 8)
 Currency = USD (Item 13)
 Type of Foreign Holder = 2
(Item 15)
 Sum of face value (Item 17 or
item 22 for ABS)
149
 Compare
Negotiable CDs
 SHL (per country)  TIC BL-2 (per
 Security Type 6 (Item 10) country)
 Currency = USD (Item 13)  Negotiable Certificates of
 Sum of face value (Item 17) Deposits (column 11)

150
 Compare
Negotiable Securities Issued
 SHL (per country)  TIC BL-2 (per
 Type of Issuer = 4 (Item 9) country)
 Security Type 5, 7, 8, 9, 10,  Negotiable Securities
11, and 12 (Item 10) Issued by Banks and Other
 Term Indicator = 1(Item Short-Term Negotiable
12) Securities (Memo Lines
 Currency = USD (Item 13) 8142-6 + 8150-3)
 Sum of face value (Item 17
or item 22 for ABS)

151
 Compare
General Government
 SHL (per country)  TIC BL-2 (per
 Type of Issuer = 1 and 3 country)
(Item 9)  Total General Government
 Security Type 7, 8, 9, 10, (Memo Line 8144-2)
11, and 12 (Item 10)
 Term Indicator = 1(Item
12)
 Currency = USD (Item 13)
 Sum of face value (Item 17
or item 22 for ABS)

152
 Compare
U.S. Agency
 SHL (per country)  TIC BL-2 (per
 Type of Issuer = 2 (Item 9) country)
 Security Type 7, 8, 9, 10,  U.S. Agencies
11, and 12 (Item 10) (Memo Line 8146-9)
 Term Indicator = 1(Item
12)
 Currency = USD (Item 13)
 Sum of face value (Item 17
or item 22 for ABS)

153
 Compare
Negotiable CDs in Foreign Currency
 SHL (per country)  TIC BQ-2 (per
 Security Type 6 (Item 10) country)
 Currency = not USD  Negotiable CDs
(Item 13) (Part 2, Memo Line 9980-5,
 Sum of face value (Item 17) column 1)

154
 Compare
Negotiable Securities in Foreign Currency

 SHL (per country)  TIC BQ-2 (per

 Security Type 7, 8, 9, 10, country)
11, or 12 (Item 10)  All Short-Term Negotiable
 Currency = not USD Securities (Part 2, Memo
(Item 13) Line 9980-5, column 2)
 Sum of face value (Item 17
or item 22 for ABS)

155
Technical Topics
Submitting your Data

Melissa Harris
 Technical Topics
Options for Filing

Mail Internet Other

On Paper: On Media: Via IESUB: Via Fax or
•Schedule 1 •Schedule 2 •Schedule 1 E-mail:
•Schedule 2 –No •Schedule 2 •Schedule 1
–Only if less minimum –No minimum •Only
than 200 record record available to
records requirement requirement reporters that
•Only available are reporting
to reporters that as Exempt
are submitting
both Schedules
1&2
157
 Technical Topics:
Media Requirements for Schedule 2 Data

 High Density IBM Compatible Diskette or

Standard CD
 Standard Windows PC ASCII Text Files With
a .txt extension
 Labeled With Reporter Name & ID
 Accompanied by Dump of Data and Copy
Command Used to Create the Diskette/CD

158
 Technical Topics:
Unacceptable Media & File Formats

 Unacceptable Media
 IBM Mainframe Tapes/Cartridges - 3480/3490
 Round (Reel) Tapes
 Unacceptable File Formats
 EBCDIC Files
 Compressed Files
 Excel files (.xls)
 COBOL packed decimal fields

159
 Technical Topics:
IESUB General Information

IESUB - Internet Electronic SUBmission

Data Submission
Schedule 1 Schedule 2
 Data Entry Form  File Transfer
 Initial and Revised  Initial and Revised
Data Data
 Standard Windows PC
ASCII Text Files With
a .txt extension
160
 Technical Topics:
IESUB General Information

 Data Review
 Data Validation for Schedule 1
 Format Validation for Schedule 2
 Receipt
 Feedback

161
 Technical Topics:
IESUB Security Information

 Unique User-ID and Password

 128 Bit SSL Encryption

 Server-side Certificate

162
 Technical Topics:
IESUB User Comments

 User Friendly and Convenient

 Time Saver
 Eliminates Paper and Fax
 Confirmation of Receipt
 File Format Checking
 Submission of Multiple Reports

163
 Technical Topics:
IESUB Additional Information

 User Request Forms and System

Requirements can be found on the Internet at:
http://www.treas.gov/tic/forms.html#benchmark

164
 Technical Topics:
Schedule 2 File Formats

Use Either of Two File Formats for IESUB

or Media Submission:
 Positional
 Semi-colon Delimited

165
 Technical Topics
Correct Positional File Example

Name of Reporting Unit

Filler (space)
Reporting Unit
Filler (space)
Sequence Number
Filler (space)
Reporter ID

166
 Technical Topics
Correct Positional File Example (continued)

Face Value (Non-ABS)

Debt Only - NULL
Filler (space)
Number of Shares Held

167
 Technical Topics
Correct Positional File Example (continued)

Maturity
Date
Filler (space)
Issue Date
Filler (space)
Face Value (Non-ABS) Debt Only
Filler (space)
Number of Shares Held -NULL
168
 Technical Topics
Incorrect Positional File Example

Reporting Unit Description

field begins in the incorrect
position, 26. The correct
position is 24.
169
 Technical Topics
Correct Delimited File Example

Name of Reporting Unit

Delimiter
Reporting Unit
Delimiter
Sequence Number
Delimiter
Reporter ID

170
 Technical Topics
Correct Delimited File Example (continued)

Delimiters
for 7 NULL Debt
& ABS Items
Number of Shares Held
Reason for Zero - NULL
Fair (Market) value
US$ Fair Market value
171
 Technical Topics
Incorrect Delimited File Example

Delimiters
for 7 NULL Debt
& ABS Items are
missing

172
 Technical Topics
Positional & Delimited Files Example

Number of shares

173
 Technical Topics
Positional & Delimited Files Example

Face Value (Non-ABS) Debt Only

174
 Technical Topics
Tips & Traps

 Date Format
 Correct format MMDDYYYY. For example, the date
May 3, 2004 would be reported as 05032004
 Examples of incorrect date formats MM/DD/YY,
MM/DD/YYYY, MM-DD-YY, etc.
 Need to Have Leading Zeroes
 Reporter ID
 Date Fields

175
 Technical Topics
Tips & Traps

 Invalid Characters in the File, such as

 An extended list of tips & traps can be
found on the Internet at
http://www.treas.gov/tic/forms.html#benchmark,
the document is titled “Key Issues for SHL
Software Developers”

176
 Technical Topics
Contact Information

 If you have questions about IESUB call your SRD

contact at the Federal Reserve Bank of New York or
call the SHL Help Line at (212)720-6300
 If you have questions about the file format call one
of the people listed below
Melissa Harris (212) 720-7314
IT Support Analyst
Amador Castelo (212) 720-8592
IT Support Analyst
Susan Ma (212) 720-1989
Team Leader
177
Things to Remember

James Greer
 Things to Remember

 Who Must Report

 U.S. - resident custodians/issuers
 U.S. - resident central securities depositories

179
 Things to Remember

 What Must Be Reported

 Reportable Securities
 Securities issued by U.S. residents and held by
foreign residents.
 Bearer securities issued by U.S.- residents.

180
 Things To Remember

 What Must Be Reported

 Do Not Report
 Securities issued by foreign entities.
 Securities issued by International and Regional
Organizations
 Securities issued by companies that have reincorporated
outside the United States.
 Depositary Receipts
 Derivative Contracts

181
 Things to Remember

 Review of Schedules
 Schedule 1
 All entities must file a Schedule 1.
 Schedule 2
 Exempt institutions do not have to file a Schedule 2.
 Make sure to include:
 Security Ids (line 5)
 Country of Foreign Holder (line 14)
 Type of Foreign Holder (line 15)
 Quantity (line 18, 19, or 23)

182
 Things to Remember

 Review of Schedules
 Properly report issuer types (line 9)
 United States Department of Treasury (code 1)
 Other federal agency and federally sponsored
enterprise (code 2)
 State or local government, including their
subdivisions (code 3)
 Other (code 4)

183
 Things to Remember

 Review of Schedules
 Properly report security types (line 10)
 Equity Securities (codes 1, 2, 3, 4)
 Debt Securities – excluding ABS
(codes 5, 6, 7, 8, 9, 10, 11)
 Asset-Backed Securities (code 12)

184
 Things To Remember

 Quality Edits
 Properly report fair (market) values and quantities
 Implicit debt and ABS prices should have an approximate
value of 1.
 Review data for consistency
 Compare Schedule 2 data for identical securities
 Prices
 Exchange rates
 Factor values (ABS only)
 Currency (debt and ABS)
 Issue and maturity dates (debt and ABS)

185
 Things to Remember

 Quality Edits
 Ensure term of debt (line 12) is calculated
based on original maturity
 Short-term (less than or equal to 1 year)
 Long-term (greater than one year)

186
 Things To Remember

 Technical Issues
 Ensure proper file layouts
 Formatting Dates
 INCORRECT - MM/DD/YY, MM/DD/YYYY
 CORRECT - MMDDYYYY
 Reporting too few/too many semi-colons (in a semi-
colon delimited file)
 Not reporting all columns

187
 Things To Remember

 Technical Issues
 Submitting data via IESUB
 Obtaining access to IESUB
 Filling out the form after the seminar
 Accessing the form at:
http://www.treas.gov/tic/forms.html#benchmark

188
 Want to Know More?

 Please contact the Securities Reports Division

of the Federal Reserve Bank of New York
 Phone: (212)720-6300
 Email: [email protected]

 Published data can be found at:

http:www.ustreas.gov/tic/fpis.html

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