Debra Kuntz Richard Mc. Gee Brian Mullarkey Dejana Neskovic April 14, 2004 Kenneth Aberbach Melissa Harris James Greer
History and Use of Foreign Portfolio Investment Data Debra Kuntz
Overview ä Part of an integrated system ä Used in conjunction with monthly flow data ä Annual data are detailed, but not timely ä Monthly data are very timely, but less precise ä Used together to create U. S. cross-border portfolio investment statistics 3
History ä Security-level data first collected in 1974 ä Measured foreign investment in U. S. securities ä Congressional concern over growing foreign influence ä Existing TIC data collected monthly and quarterly, but lacked detail 4
History ä Security-level collections of foreign holdings of U. S. securities data continued at 5 -year intervals ä These were large, benchmark collections with hundreds of reporters 5
History ä Crisis of 1997 -1998 caught most by surprise ä Lack of key data helped mask the problem ä Led to recognition that greater financial transparency was required ä Implies higher quality and faster data needed 6
Changes Required ä Lack of detailed, timely data on Reserve Assets and External Debt positions identified as major gaps 7
Changes Implemented ä Improved Reserve Asset reporting operational ä IMF’s External Debt Reporting System (EDRS) operational ä Countries are expanding collections and accelerating publication of external debt data 8
EDRS ä U. S. Government strongly supports the system ä Greater transparency required in an integrated world financial system ä Hopefully an early warning system 9
EDRS ä Required many changes to the U. S. reporting system ä Annual security-by-security reporting implemented in 2002 ä Reporting in 4 out of every 5 years will be from the largest reporters only ä Shorter submission periods 10
EDRS ä Quarterly reporting of external debt, with a one quarter lag, by sector (gov’t, bank, other) and type of debt (bond, loan, etc. ) required ä Forward debt repayment schedules strongly encouraged ä Currency composition of debt also encouraged 11
EDRS ä U. S. will augment reported data with estimated data ä Precise measurement would require quarterly security-bysecurity collections ä Too much burden on reporter and compilers, therefore annual data will be combined with monthly flow data ä Result = credible estimates 12
Institute of International Finance Recommendations ä IIF strongly urged changes ä IIF recommended a more rigorous system than will be implemented ä “…private sector participants in these markets bear a responsibility for full and timely disclosure of information on their activities. ” 13
Users ä Financial industry analysts ä International organizations ä U. S. Government ä Academic research 14
Uses ä U. S. Government - Bo. P, IIP, country exposure ä Reduced net debtor position ä Current account sustainability ä Help to explain $US strength? 15
Uses ä Annual data provide more precise geography ä Monthly long-term securities report is based on location of purchaser/seller ä Results in heavy bias towards financial centers such as the United Kingdom 16
Uses ä Security-level collection allows for greater data editing ä June 2002 data decreased estimated level of foreign holdings by $130 billion ä Shows investment by Industry 17
Increasingly Important ä Foreign ownership increasing ä D ä Securities flows now much greater than bank lending 18
Summary ä Changes have increased the burden on both reporters and compilers ä By combining estimates with reported data we are attempting to limit the burden ä Timely, accurate data from reporters is the key 19
Who Must Report Richard Mc. Gee
Who Must Report ä All U. S. -resident entities that received a copy of the instruction booklet are required to complete and return Schedule 1. ä All U. S. -resident entities that meet or exceed the exemption level are required to file. 21
Who Must Report ä Exemption Level ä The exemption level is determined on a consolidated basis ä All areas of an organization must be taken into consideration and their holdings aggregated Subsidiaries ä Affiliates ä Custodial business ä Foreign issuances ä 22
Who Must Report ä Exemption Level ä 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. ä 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 ä Why did my organization receive a copy of the instruction booklet? ä Reporters who filed Schedule 2 s on the 2000 SHL and the 2003 SHLA ä Issuers of bearer bonds ä TIC S and TIC B filers ä Agencies and GSEs ä Mutual funds ä Large privately held companies 24
Who Must Report ä Proper classification of U. S. and foreign ä Reporting organization ä Owners of securities ä Categories of reporters ä U. S. -resident custodians ä U. S. -resident central securities depositories ä U. S. -resident issuers 25
Proper Classification of U. S. and Foreign ä Definition of United States ä The fifty states of the United States ä The District of Columbia ä The Commonwealth of Puerto Rico ä 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 ä Definition of U. S. resident ä Any individual, corporation, or other entity located in the United States, including : ä branches ä subsidiaries ä foreign entities located in the United States. 27
Proper Classification of U. S. and Foreign ä International and regional organizations are foreign residents, even if located in the United States IBRD; World Bank ä Inter-American Development Bank (IADC) ä International Finance Corporation (IFC) ä Appendix D of instructions provides a partial list ä www. treas. gov ä 28
Proper Classification of U. S. and Foreign ä Corporations incorporated in the United States are U. S. residents even if they have no “physical presence” in the United States. ä Country where legally incorporated, otherwise legally organized, or licensed determines residency 29
Proper Classification of U. S. and Foreign ä How to determine residency ä Citizenship does not determine residency ä Tax forms ä W-8 forms are filed by foreign residents ä W-9 forms are filed by U. S. residents ä Mailing address 30
Proper Classification of U. S. and Foreign ä Examples of U. S. residents ä ä Bayerische Landesbank NY Branch BP America Inc. General Motors Corporation (includes GMAC) Kf. W International Finance, Inc. ä Examples of non-U. S. residents ä ä Bank of New York Tokyo Branch BP p. l. c. GMAC Canada International Bank for Reconstruction and Development (IBRD; World Bank) 31
Proper Classification of U. S. and Foreign ä Reporting organization ä 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 ä ä ä U. S. -resident branches U. S. -resident offices U. S. -resident subsidiaries 32
Proper Classification of U. S. and Foreign ä Holders of securities ä Non-U. S. -resident clients ä Non-U. S. -resident custodians ä Non-U. S. -resident central securities depositories ä Non-U. S-resident parts of your organization 33
Categories of Reporters ä U. S. -resident custodians ä U. S. -resident entities that hold in custody or manage the safekeeping of U. S. securities foreign residents, including foreign-resident custodians and central securities depositories. 34
Categories of Reporters ä Each U. S. -resident custodian should file one consolidated report for: ä ä The custody accounts for which safekeeping services are provided Their own U. S. securities held directly by foreign residents 35
Categories of Reporters ä U. S. -resident custodians should exclude securities held in custody by their foreignresident affiliates or subsidiaries. ä U. S. -resident affiliates or subsidiaries of foreign-resident custodians should exclude securities held by their foreign parent. 36
Categories of Reporters ä Schedule 2 reporting: ä U. S. -resident custodians should report all U. S. securities held in custody foreign residents and securities they are safe keeping foreign-resident custodian. ä 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 ä 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 ä U. S. -resident issuers ä Entities whose securities are held directly by foreign residents, with no U. S. -resident custodian or central securities depository involved. 39
Categories of Reporters ä Each U. S. -resident issuer should file one consolidated report for: ä Securities issued by the reporter’s U. S. -resident subsidiaries, branches, and affiliates ä Their custody holdings foreign residents 40
Categories of Reporters ä U. S. -resident issuers should exclude securities issued by foreign affiliates or subsidiaries. 41
Who Must Report A U. S. -resident issuer clears and settles through a foreign central securities depository U. S. -Resident Issuer Files Schedules 1 and 2 Foreign Central Securities Depository Does not report 42
Who Must Report A foreign-resident investor employs a foreign-resident custodian U. S. -Resident Issuer Files Schedules 1 and 2 Foreign-Resident Custodian Does not report 43
Who Must Report A U. S. -resident custodian holds securities for a foreign resident Foreign-Resident Custodian U. S. -Resident Custodian Foreign Resident Files Schedules 1 and 2 44
Who Must Report Flow Chart for Bearer Bonds Foreign Resident U. S. -Resident Issuer Files Schedules 1 and 2 U. S. -Resident Custodian Files Schedules 1 and 2 FRBNY eliminates duplicate reporting 45
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 ä Securities issued by U. S. entities, including: ä U. S. -resident entities ä U. S. subsidiaries of foreign entities ä U. S. branches of foreign banks 47
U. S. Securities ä Exclude securities issued by International and Regional Organizations - Appendix D ä Exclude securities issued by companies reincorporated outside the United States 48
U. S. Securities ä Information that does not contribute to determining if a security is U. S. : ä place of issue or location of trades ä currency of issue ä nationality of parent organization ä guarantor 49
U. S. Securities Example 1 ä Euro denominated 2 -year note issued by a Daimler Chrysler affiliate incorporated in the United States. ä Is this security reportable? 50
U. S. Securities Example 1 Answer ä Euro denominated 2 -year note issued by a Daimler Chrysler affiliate incorporated in the United States. ä Is this security reportable? ä Yes. The security was issued by a -resident entity. U. S. 51
U. S. Securities Example 2 ä U. S. dollar-denominated 30 -year Yankee bond issued by the Inter-American Development Bank. ä Is this security reportable? 52
U. S. Securities Example 2 Answer ä U. S. dollar-denominated 30 -year Yankee bond issued directly by the Inter-American Development Bank. ä Is this security reportable? ä No. This security was issued by a Regional Organization considered to be a foreign-resident entity. 53
U. S. Securities Example 3 ä 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. ä Is this security reportable? 54
U. S. Securities Example 3 Answer ä 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. ä Is this security reportable? ä 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. 55
Type of Reportable U. S. Securities ä Equity ä Short-Term Debt ä Long-Term Debt ä Asset-Backed Securities 56
Equity ä Instruments representing an ownership interest in U. S. -resident organizations. ä However, ownership interests representing direct investment are not reported. 57
Equity Direct Investment ä Direct investment is defined as ownership or control of 10% or more of an organization’s voting stock. 58
Equity ä Reportable equity securities include: ä common stock ä preferred stock ä restricted stock ä shares/units in U. S. -resident funds ä shares/units in unincorporated business enterprises, such as limited partnerships 59
Equity U. S. -Resident Funds ä ä Report foreign residents’ ownership of shares/units of funds legally established in the United States as equity. Examples of funds: ä ä ä 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 ä Classification of the fund as “U. S. ” is not based on the securities that the fund invests in. ä Example: ä A fund organized in New York that only purchases Japanese Treasury securities is a U. S. -resident fund. ä A fund organized in Japan that only purchases U. S. Treasury securities is a foreign-resident fund. 61
Funds ä Report U. S. securities owned by foreign- resident funds. ä Ownership of shares of foreign-resident funds is excluded, however, the U. S. securities owned by these funds are reportable. 62
Equity Exclusions ä Exclude from equity: ä convertible debt - reported as debt instead ä depositary receipts if the underlying security is issued by a foreign resident ä securities issued by companies incorporated outside of the United States as of June 30, 2004 ä ownership that represents general partner interests 63
Short-Term and Long-Term Debt (excluding asset-backed securities) ä Instruments that usually give the holder the unconditional right to financial assets. 64
Term ä Determine term, (short-term or long-term), based on the original maturity of the security. ä Original maturities of one year or less are short-term. ä Original maturities of greater than one year are long-term. 65
Term ä 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. ä Perpetual debt is long-term. 66
Term Examples ä A U. S. Treasury bill issued on February 15, 2004 and matures on November 15, 2004 is short-term. ä A U. S. 30 -year bond that matures on March 26, 2005 is long-term. 67
Short-Term Debt ä Reportable short-term debt includes the following instruments where the original maturity is one year or less: ä commercial paper - including asset-backed commercial paper ä negotiable certificates of deposit, bank notes and deposit notes ä U. S. government securities (e. g. , U. S. Treasury bills) ä bankers’ and trade acceptances 68
Long-Term Debt ä Reportable long-term debt includes the following instruments where the original maturity is greater than one year: ä ä ä ä bonds notes debentures convertible debt zero coupon securities stripped securities negotiable certificates of deposit 69
Long-Term Debt Stripped Securities ä Reportable stripped securities are those where the issuer of the stripped security is a U. S. -resident entity. ä Residency of the stripped security is not determined by the issuer of the underlying security. 70
Long-Term Debt Stripped Securities ä U. S. securities that are the underlying securities for stripped securities should be reported if held by a foreign resident. ä 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 ä 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. ä What should be reported by the U. S. custodians for Company A and Company B? 72
Long-Term Debt Stripped Securities Example Answer ä 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. ä What should be reported by the U. S. custodians for Company A and Company B? ä Company A’s U. S. -resident custodian reports the $100 million of U. S. bonds. The stripped securities are not reported. 73
Additional Issues ä Bearer Bonds as a single Global Certificate ä Matured Bonds that have not paid off 74
Debt Exclusions ä Exclude from short-term and long-term debt: ä shares/units in U. S. -resident funds, even if the U. S. fund invests in debt. ä investments in U. S. -resident funds are reported, but should be classified as equity on this report. 75
Debt Exclusions ä Exclude from short-term and long-term debt: ä derivatives ä loans ä letters of credit ä non-negotiable certificates of deposit ä demand deposits 76
Debt Exclusions ä Exclude from short-term and long-term debt: ä asset-backed securities ä these securities are reported, but should be classified as asset-backed securities on this report. 77
Asset-Backed Securities ä 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 ä Reportable asset-backed securities are those where the issuer securitizing the assets is a U. S. resident. ä The underlying asset is not a factor in determining whether the ABS is a U. S. security. 79
Asset-Backed Securities ä Reportable asset-backed securities include: ä collateralized mortgage obligations (CMOs) ä collateralized bond obligations (CBOs) ä collateralized loan obligations (CLOs) ä collateralized debt obligations (CDOs) 80
Asset-Backed Securities ä Reportable asset-backed securities include: ä other securities backed by: mortgages ä credit card receivables ä automobile loans ä consumer and personal loans ä commercial and industrial loans ä other assets ä 81
Asset-Backed Securities Exclusions ä Exclude from asset-backed securities: ä ä ä 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 ä 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 ä The security lender should report the U. S. security as if no repo or security lending arrangement occurred. ä The security borrower should exclude the U. S. security. 84
Review of Schedules Dejana Neskovic
Review of Schedules Schedule 1 ä Schedule 1: Reporter Contact Identification and Summary Financial Information ä Required to be filed by all entities who receive the report ä Contains basic information about the institution ä Contains summary financial information reported on Schedule 2 87
Review of Schedules Schedule 1 ä Reporter Identification Number (Line 1) ä 10 digit number, including leading zeros, issued by FRBNY. ä Contact FRBNY staff at (212) 720 -6300 or at: SHLA. Help@ny. frb. org if you do not know your identification number. 88
Review of Schedules Schedule 1 ä Reporter Type (Line 4): ä 8 categories ä Choose the classification code that best describes your entity. ä 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 ä Reporter Type (Line 4): ä Bank: Depository Institution (i. e. , an institution that takes deposits) or a bank holding company. ä 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. ä Non-Financial Organization: An entity that conducts commercial, industrial or trade activities. ä Other: Use this code if none of the categories listed describe your firm. 90
Review of Schedules Schedule 1 ä Name of Service Provider or Vendor Used (Line 10) ä Service Provider/Vendor is an institution that provides your data or prepares the electronic submission of your report. 91
Review of Schedules Schedule 1 ä Technical Contact (Lines 11 -14) ä Provide the name of the person who can be contacted for technical issues regarding the electronic submission of your report. ä 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 ä Summary of Schedule 2 Information (Lines 15 -19) ä Total number of Schedule 2 records ä Total US$ fair (market) value of all equity ä Total US$ fair (market) value of all short-term debt ä Total US$ fair (market) value of all long-term debt ä Total US$ fair (market) value of all ABS 93
Review of Schedules Schedule 1 ä Certifier Information and Signature ä Someone from within your organization must sign the Schedule 1 certifying its accuracy. ä 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 ä Schedule 2: Details of Securities ä Provides specific description and numerical information of each U. S. security ä 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 ä Sequence Number (Line 2) ä Sequence numbers should be sequential (i. e. , 1, 2, 3) by reporting unit for each Schedule 2 record submitted. ä 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 ä Reporting Unit Code and Name (Lines 3&3 a) ä 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. ä Enter a description or name of the reporting unit or division that is reporting the information. 97
Review of Schedules Schedule 2 ä Security ID Fields (Lines 5&6) ä Security ID: The security ID code used to identify the reported security. ä CUSIP and ISIN codes are strongly preferred. ä 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 ä Type of Issuer (Line 9) ä United States Department of the Treasury (code 1) ä Other Federal agency or federally sponsored enterprise (code 2) ä State or local government, including their subdivisions (code 3) ä Other (code 4) 99
Review of Schedules Schedule 2 ä Security Type (Line 10) ä Equity securities are broken out into the following categories: Common Stock (code 1) ä Preferred Stock (code 2) ä Fund Shares (code 3) ä All other equity (code 4) ä 100
Review of Schedules Schedule 2 ä Security Type (Line 10) ä Short and Long-term debt (excluding ABS) are broken out into seven categories: Commercial Paper (code 5) ä Negotiable CD (code 6) ä Convertible Debt Security (code 7) ä Zero-Coupon Bond or Note (code 8) ä Bond or Note, unstripped (code 9) ä Bond or Note, stripped (code 10) ä All Other Debt (code 11) ä 101
Review of Schedules Schedule 2 ä Security Type (Line 10) ä Asset-Backed Securities have been broken out into their own separate code (code 12) 102
Review of Schedules Schedule 2 ä Registered/Bearer Indicator (Line 11) ä 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). ä 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 ä Country of Foreign Holder (Line 14) ä Identifies the location of the beneficial owner of the security or its custodian. ä Type of Foreign Holder (Line 15) ä An abbreviated list of Foreign Official Institutions can be found in Appendix D of the instructions. ä A complete list can be found on the Treasury website at www. treas. gov/tic/forms. htm. 104
Review of Schedules Schedule 2 ä US$ Fair (Market) Value of Foreign Held U. S. Security (Line 16) ä Report the US$ fair (market) value of securities as of close of business on June 30, 2004. ä Fair (Market) Value in Currency of Denomination of Foreign Held U. S. Security (Line 16 a) ä Enter the fair (market) value of the security in the currency of original issue. ä If the currency is denominated in US$ then enter the US$ fair (market) value. 105
Review of Schedules Schedule 2 ä If US$ Fair (Market) Value is Zero (Line 17) ä 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 ä Stock is impaired or security in default ä Entity that issued the security is in receivership ä 106
Review of Schedules Schedule 2 ä Reporting an Equity Security ä Security type must be either 1, 2, 3, or 4 ä Number of Shares (line 18) must be provided ä Line items 19 through 25 pertain to debt securities and should be left blank or null 107
Review of Schedules Schedule 2 ä Reporting a Debt Security Other than ABS Security type must be either 5, 6, 7, 8, 9, 10, or 11 ä The face value in the currency of denomination (line 19) must be reported ä Face value should be rounded to the nearest whole currency unit ä If the security is traded in units, report the face value by multiplying each unit by the number of units held ä An issue date and maturity date must be reported ä 108
Review of Schedules Schedule 2 ä Reporting an Asset-Backed Security type must be 12 ä The original face value in the currency of denomination (line 22) must be reported ä * ä 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 ä Reporter level ä ä ä Security level ä ä Analyzing your data for reasonability Trend analysis Comparing attributes of reported securities to one another, and to commercial data sources. Macro level ä Additional comparisons on a broader level 111
FRBNY Calculations ä ä Based on reported market value and quantity fields, FRBNY calculates: ä Implicit Prices ä Factor Values ä Exchange Rates These calculations assist us in determining the quality of your reported market values and quantities. 112
FRBNY Price Calculations (from Schedule 2) ä 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) ä 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 = $10, 000 (Market Value) = 100, 000 shares 114
FRBNY Price Calculations (from Schedule 2) ä Equity Example: If the US$ 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 (Market Value) = $100 per share 100, 000 shares 115
FRBNY Price Calculations (from Schedule 2) ä 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 16 a) Face Value in Currency of Denomination (line 19) Implicit Price = 116
FRBNY Price Calculations (from Schedule 2) ä 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 16 a) Face Value in Currency of Denomination (line 19) Implicit Price = $1, 000 (Market Value) $900, 000 (Face Value) = 117
FRBNY Price Calculations (from Schedule 2) ä 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 16 a) Face Value in Currency of Denomination (line 19) Implicit Price = $1, 000 (Market Value) $900, 000 (Face Value) = 1. 11 118
FRBNY Price Calculations (from Schedule 2) ä Asset-Backed Securities Example: If the Fair (Market) value in currency of denomination is ¥ 100, 000, and the remaining principal outstanding in currency of denomination is ¥ 110, 000, what is the implicit price? Implicit Price = Fair (Market) Value in Currency of Denomination (line 16 a) Remaining Principal Outstanding in Currency of Denomination (line 23) Implicit Price = 119
FRBNY Price Calculations (from Schedule 2) ä Asset-Backed Securities Example: If the Fair (Market) value in currency of denomination is ¥ 100, 000, and the remaining principal outstanding in currency of denomination is ¥ 110, 000, what is the implicit price? Implicit Price = Fair (Market) Value in Currency of Denomination (line 16 a) Remaining Principal Outstanding in Currency of Denomination (line 23) Implicit Price = ¥ 100, 000 (Market Value) = ¥ 110, 000 (Remaining Principal) 120
FRBNY Price Calculations (from Schedule 2) ä Asset-Backed Securities Example: If the Fair (Market) value in currency of denomination is ¥ 100, 000, and the remaining principal outstanding in currency of denomination is ¥ 110, 000, what is the implicit price? Implicit Price = Fair (Market) Value in Currency of Denomination (line 16 a) Remaining Principal Outstanding in Currency of Denomination (line 23) Implicit Price = ¥ 100, 000 (Market Value) =. 909 ¥ 110, 000 (Remaining Principal) 121
FRBNY Price Calculations (from Schedule 2) ä Equity: US$ Fair (Market) Value (line 16) Number of Shares (line 18) ä Debt (Non-ABS): ä ABS : Fair (Market) Value in Currency of Denomination (line 16 a) Face Value in Currency of Denomination (line 19) Fair (Market) Value in Currency of Denomination (line 16 a) Remaining Principal Outstanding in Currency of Denomination (line 23) 122
FRBNY Factor Calculations (from Schedule 2) ä 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) ä 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) ä 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 = 0. 78 125
FRBNY Exchange Rate Calculations (from Schedule 2) ä 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 16 a) Exchange Rate = 126
FRBNY Exchange Rate Calculations (from Schedule 2) ä 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 16 a) Exchange Rate = $100, 000 £ 85, 000 = 127
FRBNY Exchange Rate Calculations (from Schedule 2) ä Exchange Rate Example: If the US$ 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 16 a) Exchange Rate = $100, 000 £ 85, 000 = 1. 18 128
Reporter Level Review Reasonability Comparisons ä Schedule 1 -vs- Schedule 2 comparison ä Schedules 1 and 2, comparison to prior year (reporting trends, if you’ve reported in prior years) 129
Reporter Level Review Reasonability Analysis ä Ensuring all Schedule 2 data fields were reported. These data must include: ä ä ä Security ID Country of foreign-resident holder Type of foreign holder (Official or Other) Number of shares held by foreign residents (equity) Face Value held by foreign residents (non-ABS debt) Remaining principal outstanding held by foreign residents (ABS) 130
Reporter Level Review Reasonability ä Currency/Exchange Rate Analysis ä ä ä Currency is US$ but US$ Fair (Market) Value (item 16) does not equal the Fair (Market) Value in currency of denomination (item 16 a). 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 ä ä Country of foreign holder is U. S. ä ä ä 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 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 ä ä Country of foreign holder is Canada ä ä 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 ä Bearer Bonds ä ä 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 ä Key Securities Analysis ä Largest foreign-held securities by US$ Fair (Market) value ä Implicit exchange rates, implicit prices, country of foreign holder, etc. ä Securities reported with zero quantities ä If reported correctly, these securities do not need to be reported, and should be excluded from future reports. 135
Reporter Level Review Reasonability ä 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) ä debt prices far above par ä invalid countries of foreign holder ä issue dates after as-of date ä additional comparisons to other reporters’ data (e. g. , implicit prices) 136 ä
Reporter Level Review Reasonability ä ä 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 ä Data embedded in the security description, e. g. , security type or maturity date, are compared to data in the relevant fields. ä Term of debt is calculated using issue and maturity dates and compared to the reported term and the security description. ä Issuer should not be a foreign resident. ä Reincorporated organizations should not be reported. ä 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. ä ä ä 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 ä Foreign Holdings of U. S. Securities (SHL) ä TIC Reports ä TIC BL-2 Customer Liabilities ä TIC BQ-2 Customer Liabilities denominated in foreign currency ä http: //www. ustreas. gov/tic/ 141
Differences ä TIC - Face Value ä SHL - Face Value and Market Value. ä TIC - Aggregate per country ä SHL - Detailed information on each security 142
Differences ä TIC - USD or USD equivalent ä SHL - Market Value in both USD and currency of denomination. Face value in currency of denomination that FRBNY converts to USD. 143
Differences ä There may be more than one TIC report filed per institution. ä One consolidated SHL report filed per institution ä 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 ä Treasury Securities ä Agency Securities ä Negotiable Securities ä Foreign Currencies ä Negotiable CDs ä Negotiable Securities Issued 145
Compare Treasury Securities ä SHL (per country) ä ä ä Type of Issuer = 1 (Item 9) Term Indicator = 1(Item 12) Currency = USD (Item 13) Type of Foreign Holder = 1 (Item 15) Sum of face value (Item 17) ä TIC BL-2 (per country) ä Short-Term U. S. Treasury Obligations to Foreign Official Institutions (column 1) 146
Compare Treasury Securities ä SHL (per country) ä ä ä Type of Issuer = 1 (Item 9) Term Indicator = 1(Item 12) Currency = USD (Item 13) Type of Foreign Holder = 2 (Item 15) Sum of face value (Item 17) ä TIC BL-2 (per country) ä Short-Term U. S. Treasury Obligations to Foreign Banks and all Other Foreigners (column 4 + 7) 147
Compare Negotiable Securities ä SHL (per country) ä ä ä Type of Issuer = 2, 3, and 4 (Item 9) Security Type 5, 6, 7, 8, 9, 10, 11, and 12 (Item 10) Term Indicator = 1 (Item 12) (Security Type 6 includes Term Indicator = 2) Currency = USD (Item 13) Type of Foreign Holder =1 (Item 15) Sum of face value (Item 17 or item 22 for ABS) ä TIC BL-2 (per country) ä Negotiable CDs and Short. Term Negotiable Securities to Foreign Official Institutions (column 2) 148
Compare Negotiable Securities ä SHL (per country) ä ä ä Type of Issuer = 2, 3, and 4 (Item 9) Security Type 5, 6, 7, 8, 9, 10, 11, and 12 (Item 10) Term Indicator = 1(Item 12) (Security Type 6 includes Term Indicator = 2) Currency = USD (Item 13) Type of Foreign Holder = 2 (Item 15) Sum of face value (Item 17 or item 22 for ABS) ä TIC BL-2 (per country) ä Negotiable CDs and Short. Term Negotiable Securities to Foreign Banks and all Other Foreigners (column 5 + 8) 149
Compare Negotiable CDs ä SHL (per country) ä ä ä Security Type 6 (Item 10) Currency = USD (Item 13) Sum of face value (Item 17) ä TIC BL-2 (per country) ä Negotiable Certificates of Deposits (column 11) 150
Compare Negotiable Securities Issued ä SHL (per country) ä ä ä Type of Issuer = 4 (Item 9) Security Type 5, 7, 8, 9, 10, 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) ä TIC BL-2 (per country) ä Negotiable Securities Issued by Banks and Other Short. Term Negotiable Securities (Memo Lines 8142 -6 + 8150 -3) 151
Compare General Government ä SHL (per country) ä ä ä Type of Issuer = 1 and 3 (Item 9) Security Type 7, 8, 9, 10, 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) ä TIC BL-2 (per country) ä Total General Government (Memo Line 8144 -2) 152
Compare U. S. Agency ä SHL (per country) ä ä ä Type of Issuer = 2 (Item 9) Security Type 7, 8, 9, 10, 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) ä TIC BL-2 (per country) ä U. S. Agencies (Memo Line 8146 -9) 153
Compare Negotiable CDs in Foreign Currency ä SHL (per country) ä ä ä Security Type 6 (Item 10) Currency = not USD (Item 13) Sum of face value (Item 17) ä TIC BQ-2 (per country) ä Negotiable CDs (Part 2, Memo Line 9980 -5, column 1) 154
Compare Negotiable Securities in Foreign Currency ä SHL (per country) ä ä ä Security Type 7, 8, 9, 10, 11, or 12 (Item 10) Currency = not USD (Item 13) Sum of face value (Item 17 or item 22 for ABS) ä TIC BQ-2 (per country) ä All Short-Term Negotiable Securities (Part 2, Memo Line 9980 -5, column 2) 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 E-mail: • Schedule 1 • Schedule 2 –Only if less than 200 records –No minimum record requirement • Schedule 2 –No minimum record requirement • Only available to reporters that are submitting both Schedules 1&2 • Schedule 1 • Only available to reporters that are reporting as Exempt 157
Technical Topics: Media Requirements for Schedule 2 Data ä High Density IBM Compatible Diskette or Standard CD ä Standard Windows PC ASCII Text Files With a. txt extension ä Labeled With Reporter Name & ID ä Accompanied by Dump of Data and Copy Command Used to Create the Diskette/CD 158
Technical Topics: Unacceptable Media & File Formats ä Unacceptable Media ä IBM Mainframe Tapes/Cartridges - 3480/3490 ä Round (Reel) Tapes ä Unacceptable File Formats ä EBCDIC Files ä Compressed Files ä Excel files (. xls) ä COBOL packed decimal fields 159
Technical Topics: IESUB General Information IESUB - Internet Electronic SUBmission Data Submission Schedule 1 Schedule 2 ä ä Data Entry Form Initial and Revised Data ä ä ä File Transfer Initial and Revised Data Standard Windows PC ASCII Text Files With a. txt extension 160
Technical Topics: IESUB General Information ä Data Review ä Data Validation for Schedule 1 ä Format Validation for Schedule 2 ä Receipt ä Feedback 161
Technical Topics: IESUB Security Information ä Unique User-ID and Password ä 128 Bit SSL Encryption ä Server-side Certificate 162
Technical Topics: IESUB User Comments ä User Friendly and Convenient ä Time Saver ä Eliminates Paper and Fax ä Confirmation of Receipt ä File Format Checking ä Submission of Multiple Reports 163
Technical Topics: IESUB Additional Information ä 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: ä Positional ä Semi-colon Delimited 165
Technical Topics Correct Positional File Example Name of 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 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 ä Date Format ä Correct format MMDDYYYY. For example, the date May 3, 2004 would be reported as 05032004 ä Examples of incorrect date formats MM/DD/YY, MM/DD/YYYY, MM-DD-YY, etc. ä Need to Have Leading Zeroes ä Reporter ID ä Date Fields 175
Technical Topics Tips & Traps ä Invalid Characters in the File, such as ä 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 ä 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 ä 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 ä Who Must Report ä U. S. - resident custodians/issuers ä U. S. - resident central securities depositories 179
Things to Remember ä What Must Be Reported ä Reportable Securities issued by U. S. residents and held by foreign residents. ä Bearer securities issued by U. S. - residents. ä 180
Things To Remember ä What Must Be Reported ä Do Not Report ä Securities issued by foreign entities. ä ä Securities issued by International and Regional Organizations Securities issued by companies that have reincorporated outside the United States. Depositary Receipts ä Derivative Contracts ä 181
Things to Remember ä Review of Schedules ä Schedule 1 ä All entities must file a Schedule 1. ä Schedule 2 Exempt institutions do not have to file a Schedule 2. ä Make sure to include: ä ä ä 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 ä Review of Schedules ä Properly report issuer types (line 9) United States Department of Treasury (code 1) ä Other federal agency and federally sponsored enterprise (code 2) ä State or local government, including their subdivisions (code 3) ä Other (code 4) ä 183
Things to Remember ä Review of Schedules ä Properly report security types (line 10) Equity Securities (codes 1, 2, 3, 4) ä Debt Securities – excluding ABS (codes 5, 6, 7, 8, 9, 10, 11) ä Asset-Backed Securities (code 12) ä 184
Things To Remember ä Quality Edits ä Properly report fair (market) values and quantities ä ä Implicit debt and ABS prices should have an approximate value of 1. Review data for consistency ä Compare Schedule 2 data for identical securities ä ä ä Prices Exchange rates Factor values (ABS only) Currency (debt and ABS) Issue and maturity dates (debt and ABS) 185
Things to Remember ä Quality Edits ä Ensure term of debt (line 12) is calculated based on original maturity Short-term (less than or equal to 1 year) ä Long-term (greater than one year) ä 186
Things To Remember ä Technical Issues ä Ensure proper file layouts ä Formatting Dates ä ä INCORRECT - MM/DD/YY, MM/DD/YYYY CORRECT - MMDDYYYY Reporting too few/too many semi-colons (in a semicolon delimited file) ä Not reporting all columns ä 187
Things To Remember ä Technical Issues ä Submitting data via IESUB ä Obtaining access to IESUB ä ä Filling out the form after the seminar Accessing the form at: http: //www. treas. gov/tic/forms. html#benchmark 188
Want to Know More? ä Please contact the Securities Reports Division of the Federal Reserve Bank of New York ä Phone: (212)720 -6300 ä Email: shla. help@ny. frb. org ä Published data can be found at: http: www. ustreas. gov/tic/fpis. html 189
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