Most people who buy or sell stocks, bonds, or mutual funds, seldom consider the intricate machinery that facilitates these transactions. For participants ranging from individual investors to major financial institutions, the capacity for swift and dependable trading is typically taken for granted.
However, underpinning this seamless process is a crucial layer of infrastructure: the unique identifiers that categorize every security within the marketplace.
Without these identifiers, the matching, clearing, and settling of trades wouldn’t possess the efficiency we all rely on. Currently, a dynamic marketplace of competing identifiers provides banks, asset managers, and various institutions with the flexibility to select the products that best cater to their needs.
The CUSIP—a nine-character code that has long served as the common language enabling trillions of dollars in financial transactions—stands as the industry standard.
However, in the dwindling months of the Biden administration, federal regulators proposed a significant shift that threatens to destabilize this well-functioning system.
Under the guise of the Financial Data Transparency Act, agencies are advancing a rule that would dismantle the free market for identifiers and enforce the universal adoption of a single code: the Financial Instrument Global Identifier (FIGI), developed by Bloomberg LP.
Herein lies the issue: the law never mandated the selection of a single, government-sanctioned identifier. The statute was silent on the topic of appointing an exclusive identifier, much less imposing one across the entire economy. Yet, regulators appear to have unilaterally anointed Bloomberg as the monopoly provider of this service.
This decision raises serious concerns on multiple fronts. Bloomberg’s FIGI is far from being the industry standard; its market adoption is minimal relative to other identifiers. Although its advocates claim it is a free, open-source tool managed by a non-profit organization, the data available without charge is limited.
To fully utilize FIGI’s capabilities, market participants would be funneled into Bloomberg’s costly platforms, particularly the Bloomberg Terminal, which can cost tens of thousands of dollars per user annually. Given Bloomberg’s existing dominance in the financial information sector, this rule threatens to entrench an anticompetitive stranglehold.
The political context surrounding this proposal further intensifies scrutiny. Just months prior, Michael Bloomberg, the billionaire founder of Bloomberg LP, donated a staggering $19 million to a leading Biden super PAC.
At the very least, this timing raises questions about potential influence; at worst, it implies that the Biden administration has maneuvered public policy to benefit a politically connected donor. Either way, the architecture of the American financial system should not be reshaped to enrich a billionaire with privileged access.
Voices across the industry have sounded the alarm.
The Bank Policy Institute cautioned that the “likely market disruption associated with a mandated FIGI conversion is not warranted” and called for regulators to reconsider. The American Bankers Association expressed concern that the administration overlooked “the costs to market participants to render FIGI useful” and “the disruptive impact on existing market infrastructure.”
NASDAQ succinctly stated that “[t]ransitioning from CUSIP to FIGI or other identifiers risks introducing instability without a clear benefit.”
Even state treasurers, who manage the finances of municipalities nationwide, have weighed in. The National Association of State Treasurers, representing officials from both sides of the aisle, strongly opposed any designation of an identifier other than the Committee on Uniform Securities Identification Procedures (CUSIP) as the exclusive common identifier for municipal securities.
In short, the backlash has been both overwhelming and bipartisan. From Wall Street to Main Street, stakeholders recognize that forcing the market to abandon established systems in favor of Bloomberg’s identifier would generate unnecessary costs, confusion, and risk.
So why forge ahead?
The Biden administration has not provided a convincing rationale, and the lack of transparency only fuels the suspicion that this initiative is less about efficiency or fairness, and more about self-interest.
Fortunately, the rule is not yet finalized. There remains a window of opportunity to recalibrate before widespread disruption reverberates throughout the financial system.
The Trump administration should critically evaluate this proposal and work to restore a neutral playing field—one where identifiers compete based on merit, not political favoritism.
Our financial markets thrive on stability, trust, and open competition. They should not be manipulated to serve as a personal revenue stream for those in politically favorable positions. Washington must resist the temptation to sell off vital market infrastructure without a competitive bidding process.
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Michael Busler is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years.