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					W. Griever            S. Kessel
W. Carlucci           T. Grob
D. Kuntz              K. Aberbach
R. McGee              M. Harris

       November 12, 2003
U.S. Portfolio Investment Surveys



           William Griever
             Survey Perspective


• Part of an integrated system

• Used in conjunction with monthly flow data

• Surveys are detailed, accurate, but not timely

• Monthly data very timely, but less accurate

• Used together to create ongoing estimates

                                                   3
              Survey History

• First survey in 1974

• Measured foreign investment in U.S. securities

• Congressional concern over growing foreign
  influence

• Existing data lacked detail


                                                   4
           Survey History

• Liability surveys continued at 5-year
  intervals
• Correct amounts foreign held
• Improve geography
• Foreign ownership increasing
•    Dec. 1974 - 4.8%
•    June 2002 - 12.2%
                                          5
                  Asset Surveys

• First in 1994
• Levels of U.S. foreign security holdings had been
    modest
•      $ 9 billion per year 1980-1989

•      $65 billion per year 1990-1994

• Assets were believed to be under-counted

                                                      6
        Asset Survey Results

• Measured U.S. holdings of foreign securities 60%
  above estimates

• $870 billion vs. $540 billion

• Showed need for future surveys




                                                     7
           Asset Under-Count

• Worldwide problem

• Measured portfolio investment flows 1991-1994

•     Assets      $400 billion per year

•     Liabilities $500 billion per year

• Countries had concentrated on measuring liabilities




                                                        8
                 First CPIS

• Organized by the IMF, at year-end 1997

• 29 countries participated

• World measured additional $750 billion

• U.S. measured an additional $300 billion




                                             9
        Problems Remain

• Worldwide, at year-end 1997

•     Assets       $7.7 trillion

•     Liabilities $9.3 trillion

• Difference 18%

• Implied more needed to be done



                                   10
                 CPIS 2001


• 67 countries
• All of the major industrial countries
• Most of the major offshore financial centers
• Short-term securities included



                                                 11
         Problems Remain

• Worldwide, at year-end 2001

•     Assets       $12.6 trillion

•     Liabilities $15.0 trillion

• Difference 16%

• Implies more needs to be done



                                    12
                The Future

• Internationally-coordinated annual surveys

• Annual U.S. surveys

• U.S. benchmark surveys every 5 years

• U.S. “Large Reporters” surveys intervening years



                                                     13
                 Data Uses

• Why care about these data?

•       U.S. is the world’s largest net debtor

•       Level of U.S. net debt is increasing rapidly

• A cause for concern?




                                                       14
    U.S. Debt Position

•




                         15
Debt Components




                  16
                   Data Uses


• Financial industry analysts

• International organizations

• U.S. Gov’t policy makers, data compilers

• Academic researchers

• Correct liabilities country attribution

                                             17
         Country Attribution

• Country attribution of U.S. liabilities skewed
  towards major financial centers

• Country attribution on asset surveys accurate

• Can use counter-party asset data to improve
  geography of U.S. liabilities data


                                                   18
Country Attribution




                      19
                Data Uses

• Asset data can be used to estimate other countries’
  liabilities

• Combined CPIS asset results yield net liability
  positions by country

• Cross-check of reported country liability positions

• Improved geography of all countries’ liabilities
                                                     20
Who Must Report




    William Carlucci
          Who Must Report
• Proper classification of U.S. and foreign
  – Reporting organization
  – Owners of securities
  – Securities
• Categories of reporters
  – U.S.-resident custodians
  – U.S.-resident end-investors
• Reporting panels
  – Schedule 2 and Schedule 3 reporters
  – Schedule 3 only reporters
                                              22
 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
                                                  23
  Proper Classification of U.S.
         and Foreign
• Definition of U.S. resident
  – Any individual, corporation, or other organization
    located in the United States, including :
     • branches
     • subsidiaries
     • foreign entities located in the United States.
  – Corporations incorporated in the United States are
    U.S. residents even if they have no “physical
    presence” in the United States.
                                                  24
  Proper Classification of U.S.
         and Foreign
• Examples of U.S.          • Examples of foreign
  residents                   residents
  – General Motors            – GMAC Canada
    Corporation (includes     – BP p.l.c.
    GMAC)                     – Bank of New York
  – BP America Inc.             Tokyo Branch
  – Societe Generale New      – Tyco International, Ltd.
    York Branch               – International Bank for
  – KfW International           Reconstruction and
    Finance, Inc.               Development (IBRD;
                                World Bank)
                                                      25
 Proper Classification of U.S.
        and Foreign
• How to determine residency
  – Country where legally incorporated,
    otherwise legally organized, or licensed
  – Tax forms
     • W-8 forms are filed by foreign residents
     • W-9 forms are filed by U.S. residents
  – Mailing address

                                                  26
   Proper Classification of U.S.
          and Foreign
• Citizenship does not determine residency
• International and regional organizations are
  foreign residents, even if located in the
  United States
  –   IBRD; World Bank
  –   Inter-American Development Bank (IDC)
  –   International Finance Corporation (IFC)
  –   Appendix E of instructions provides a complete list
                                                      27
 Proper Classification of U.S.
        and Foreign

• Reporting organization
  – Report foreign securities held or managed
    by all U.S.-resident parts of your
    organization
     • U.S.-resident branches
     • U.S.-resident offices
     • U.S.-resident subsidiaries
                                           28
  Proper Classification of U.S.
         and Foreign
• Owners of securities
  – U.S.-resident clients
  – U.S-resident parts of your organization

• Securities
   – Issued by foreign organizations
   – Issued by foreign parts of your
     organization                             29
     Categories of Reporters


• U.S.-resident custodians
  – U.S.-resident organizations that hold
    foreign securities in custody for other
    U.S. residents
  – Invest in foreign securities for their own
    account

                                                 30
     Categories of Reporters


• U.S.-resident end-investors
  – U.S.-resident organizations that invest in
    foreign securities on behalf of other U.S.
    residents
  – Invest in foreign securities for their own
    account

                                                 31
      Categories of Reporters
• Examples of U.S.-resident end-investors
  – Managers of private and public pension funds
  – Managers of mutual funds, country funds, unit-
    investment funds, exchange-traded funds, collective-
    investment trusts
  – Insurance companies
  – Foundations
  – Institutions of higher learning (e.g., university
    endowments)
  – Trusts and estates
                                                  32
          Reporting Panels
• Schedule 2 and Schedule 3 reporters
   – Required to file in the same manner as
     they did on the December 31, 2001 report
• Schedule 3 only reporters
  – Required to file Schedule 3 in the same manner
    as they did on the December 31, 2001 report
  – Data that was reported on Schedule 2 in
    December 31, 2001 submission will now be
    reported on Schedule 3 for the annual reports
                                                 33
       Schedule 2 and Schedule 3
              Reporters
           Exemption Levels
• No Schedule 2 exemption level.
• Securities entrusted to U.S. resident custodians
  should be reported on Schedule 3 if the fair (market)
  value of the foreign securities aggregated over
  accounts owned and/or managed equals $100
  million or more as of December 31.
• This exemption level applies to each U.S.-resident
  custodian used.

                                                    34
     Schedule 3 Only Reporters
         Exemption Levels
• “Schedule 3 Only” reporters are exempt from
  reporting Schedule 2.
• Securities entrusted to U.S. resident custodians
  should be reported on Schedule 3 if the fair
  (market) value of the foreign securities aggregated
  over accounts owned and/or managed equals
  $100 million or more as of December 31.
• This exemption level applies to each U.S.-resident
  custodian used.

                                                    35
          Schedule 3 Only Reporters
              Exemption Levels
• Securities held directly with foreign-resident
  custodians, including:
   –   foreign-resident offices of U.S. banks
   –   foreign-residents of U.S. broker/dealers
   –   foreign-resident central securities depositories
   –   should be reported on Schedule 3 if the fair (market) value of
       the foreign securities aggregated over accounts owned and/or
       managed equals $100 million or more as of December 31.




                                                                 36
     Schedule 3 Only Reporters
         Exemption Levels

• Securities held directly, managed directly, or held
  with U.S.-resident central securities depositories,
  (for which no U.S.-resident custodian is used),
  should be reported on Schedule 3 if the fair
  (market) value of the foreign securities aggregated
  over accounts owned and/or managed equals
  $100 million or more as of December 31.



                                                    37
            Reporting Panels
• Schedule 2 and Schedule 3 reporters
• U.S.-resident custodians
   – Schedule 2, report detailed information on foreign
    securities that:
      • hold in custody for U.S.-resident clients
      • invest in for own account
      • entrust to foreign-resident custodians or central
        securities depositories
      • entrust to U.S.-resident central securities
        depositories
                                                      38
               Reporting Panels
      Schedule 2 and Schedule 3 Reporters
           U.S.-Resident Custodians
             Schedule 2 Reporting

       U.S. resident
                                      U.S.-resident         U.S.-resident central
 (including the reporting
                                       custodian            securities depository
custodian’s own portfolio)



                                                              Foreign-resident
                                                            custodian or central
                                                            securities depository
                                The “Schedule 2 and
                             Schedule 3” reporter submits
                                   detailed data on
                                     Schedule 2.

                                                                               39
           Reporting Panels
• Schedule 2 and Schedule 3 reporters
• U.S.-resident end-investors
   – Schedule 2, report detailed information on
     foreign securities not entrusted to U.S.-resident
     custodians; that is when the end-investor:
      • holds the foreign securities directly
      • employs foreign-resident custodians or foreign
        central securities depositories
      • employs U.S.-resident central securities
        depositories
                                                   40
              Reporting Panels
     Schedule 2 and Schedule 3 Reporters
         U.S.-Resident End-Investors
            Schedule 2 Reporting
      U.S. resident
                                      U.S.-resident
(including the reporting                                  U.S.-resident central
                                      end-investor
   end-investor’s own                                     securities depository
                                 (including managers)
        portfolio)



                                                            Foreign-resident
                                                          custodian or central
                                                          securities depository
                              The “Schedule 2 and
                           Schedule 3” reporter submits
                                 detailed data on
                                   Schedule 2.

                                                                             41
          Reporting Panels

• Schedule 2 and Schedule 3 reporters
• U.S.-resident custodians and end-investors
   – Schedule 3, report summary information
     for foreign securities entrusted to the
     safekeeping of a U.S.-resident custodian
     (excluding U.S.-resident central securities
     depositories)

                                              42
              Reporting Panels
     Schedule 2 and Schedule 3 Reporters
            Schedule 3 Reporting
      U.S. resident                     U.S.-resident
                                                                    U.S.-resident
(including the reporting                custodian or
                                                                    subcustodian
   organization’s own                   end-investor
        portfolio)                 (including managers)




                                The “Schedule 2 and            The “Schedule 2 and
                             Schedule 3” reporter submits      Schedule 3” reporter
                                  summary data on                submits detailed
                           Schedule 3 for each U.S.-resident    data on Schedule 2.
                                 custodian using the
                             appropriate custodian codes.


                                                                                    43
          Reporting Panels

• Schedule 3 only reporters
• U.S.-resident custodians and end-investors
   – Schedule 3, report summary information
     for all foreign securities, regardless of
     where they are held in custody



                                                 44
             Reporting Panels

• Schedule 3 only reporters
• U.S.-resident custodians and end-investors
   – Separate Schedule 3 report for foreign securities
     entrusted to each U.S.-resident custodian using the
     appropriate custodian code
   – Consolidated Schedule 3 report for foreign securities
     entrusted to foreign-resident custodians and central
     securities depositories using custodian code 77
   – Consolidated Schedule 3 report for foreign securities
     held directly or those entrusted to U.S.-resident central
     securities depositories using custodian code 88

                                                             45
              Reporting Panels
          Schedule 3 Only Reporters

      U.S. resident             U.S.-resident
                                                      Foreign-resident
(including the reporting        custodian or
                                                    custodian or central
   organization’s own           end-investor
                                                    securities depository
        portfolio)         (including managers)




                            The “Schedule 3 only”
                              reporter submits
                              summary data on
                               Schedule 3 using
                              custodian code 77.



                                                                       46
              Reporting Panels
          Schedule 3 Only Reporters

      U.S. resident                     U.S.-resident              U.S.-resident
(including the reporting                custodian or               subcustodian
   organization’s own                   end-investor
        portfolio)                 (including managers)




                                The “Schedule 3 only”           The “Schedule 3 only”
                           reporter submits summary data on       reporter submits
                            Schedule 3 for each U.S.-resident     summary data on
                                  custodian using the              Schedule 3 using
                              appropriate custodian codes.       custodian code 88.



                                                                                   47
 What Must be Reported
       on the

Report of U.S. Ownership of Foreign
Securities, Including Selected Money
    Market Instruments (SHCA)



            Debra Kuntz
         Foreign Securities

• Securities issued by foreign entities,
  including:
  – foreign-resident organizations
  – foreign subsidiaries of U.S. organizations
  – foreign branches of U.S. banks
  – U.S. corporations that have re-incorporated, i.e.,
    are now incorporated under the laws of a
    foreign country
  – international and regional organizations
                                                    49
          Foreign Securities


• Information that does not contribute to
  determining if a security is foreign:
   – place of issue or location of trades
   – currency of issue
   – nationality of parent organization
   – guarantor
                                            50
         Foreign Securities
            Example 1

• Euro denominated 2-year note issued by a
  Daimler Chrysler affiliate incorporated in
  the United States.

• Is this security reportable?

                                               51
         Foreign Securities
         Example 1 Answer
• Euro denominated 2-year note issued by a
  Daimler Chrysler affiliate incorporated in
  the United States.

• Is this security reportable?

• No. The security was issued by a
  U.S.-resident entity.
                                               52
           Foreign Securities
              Example 2

• U.S. dollar-denominated 2-year note issued
  directly in the United States by Daimler
  Chrysler incorporated in Germany.

• Is this security reportable?

                                               53
          Foreign Securities
          Example 2 Answer
• U.S. dollar-denominated 2-year note issued
  directly in the United States by Daimler Chrysler
  incorporated in Germany.

• Is this security reportable?

• Yes. This security was issued by a foreign-
  resident entity. The currency of denomination and
  place of issue do not factor into the decision of
  whether the security is foreign or not.

                                                      54
          Foreign 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?

                                           55
             Foreign 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?

• Yes. 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.
                                                       56
     Type of Reportable Foreign
             Securities


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


                                  57
                    Equity

• Instruments representing an ownership
  interest in foreign-resident organizations.

• However, ownership interests representing
  direct investment are not reported.


                                                58
              Equity
         Direct Investment


• Direct investment is defined as ownership
  or control of 10% or more of an
  organization’s voting stock.



                                              59
                  Equity

• Reportable equity securities include:
  – common stock
  – restricted stock
  – preferred stock
  – depositary receipts/shares
  – shares/units in foreign-resident funds
  – limited partner ownership in foreign-
    resident limited partnerships            60
                     Equity
• Security type =1 (common stock)
   – all common stock, including restricted stock
   – depositary receipts/shares where the underlying
     security is common stock
• Security type = 2 (preferred stock)
   – all preferred stock, including restricted stock
      • participating preference shares
      • nonparticipating preference shares
   – convertible preferred stock
   – depositary receipts/shares where the underlying
     security is preferred stock                     61
                    Equity

• Security type = 3 (funds)
   – shares/units in foreign-resident funds
• Security type = 4 (other equity)
   – limited partner ownership in foreign-
     resident limited partnerships
   – all other foreign equity not specified in
     security types 1, 2, and 3
                                                 62
               Equity
           Restricted Stock

• Where possible, report the restricted shares
  with the same security ID (e.g., ISIN,
  CUSIP) as the non-restricted shares.
• If the restricted shares are valued at zero,
  report the market value for restricted stock
  using the non-restricted shares price.

                                                 63
               Equity
           Preferred Stock

• Differentiated participating and
  nonparticipating preference shares on the
  December 31, 2001 report.
• All preferred stock should now be classified
  as equity, security type = 2 (equity,
  preferred stock).
                                             64
                Equity
       Depositary Receipts/Shares

• Reportable depositary receipts/shares are those where
  the underlying security was issued by a foreign
  resident.

• Although the depositary receipt/share is usually issued
  by a U.S.-resident organization, it represents an
  ownership interest in the foreign-resident company.

• ADRs, ADSs, GDRs, IDRs are considered foreign
  securities for this report.
                                                      65
            Equity
   Depositary Receipts/Shares

• Issuers of depositary receipts/shares should
  not report the holdings of the underlying
  foreign securities.

• U.S.-resident holders of the depositary
  receipts/shares should report these holdings.

                                                 66
            Equity
  Depositary Receipts/Shares
           Example
• U.S. Company A has issued $100 million of
  ADRs representing an ownership interest in
  a Swiss company. U.S. Company B
  purchases these ADRs.

• What should Company A and B report?

                                           67
               Equity
 Depositary Receipts/Shares Example
              Answer

• U.S. Company A has issued $100 million of ADRs
  representing an ownership interest in a Swiss
  company. U.S. Company B purchases these ADRs.
• What should Company A and B report?
• Company B should report the holdings of $100
  million of ADRs. Company A would not report
  equity ownership in the Swiss company.

                                                   68
            Equity
   Depositary Receipts/Shares
• Report the following         • Report the following
  based on the depositary        based on the underlying
  receipt/share:                 security:
   – security id                  – security type
   – security description         – name of issuer
   – depositary                   – country of issuer
     receipt/share indicator
   – currency of
     denomination
   – market value
   – number of shares held

                                                           69
              Equity
      Foreign-Resident Funds
• Report U.S. residents’ ownership of shares/units of
  funds legally established outside of the United
  States as equity.
• Examples of funds:
   – closed-end and open-end mutual funds
   – money market funds
   – exchange-traded funds
   – index-linked funds
   – investment trusts
                                                   70
                Equity
        Foreign-Resident Funds
• Classification of the fund as “foreign” is not based on
  the securities that the fund invests in.
• Example:
   – A fund organized in Bermuda that only purchases
     U.S. Treasury securities is a foreign-resident fund.
   – A fund organized in the United States that only
     purchases Japanese Treasury securities is a U.S.-
     resident fund.
                                                      71
      Foreign-Resident Funds
• Report U.S.-resident funds’ ownership of
  foreign securities.

• Ownership of shares of U.S.-resident funds
  is excluded, however, the foreign securities
  owned by these funds are reportable.


                                             72
          Equity Exclusions

• Exclude from equity:
  – convertible debt

  – convertible debt is reported, but should
    be classified as debt on this report.



                                               73
         Equity Exclusions

• Exclude from equity:
  – general partner ownership of foreign-
    resident limited partnerships
  – all other direct investment




                                            74
  Short-Term and Long-Term
  Debt (excluding asset-backed
           securities)


• Instruments that usually give the holder the
  unconditional right to financial assets.




                                                 75
                   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.

                                              76
                   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.


                                             77
           Term Examples


• A Japanese Treasury bill issued on
  November 15, 2003 and matures on
  February 15, 2004 is short-term.

• A German 30-year bond that matures on
  March 26, 2004 is long-term.

                                          78
          Short-Term Debt
• Reportable short-term debt includes the
  following instruments where the original
  maturity is one year or less:
   – commercial paper
   – negotiable certificates of deposit, bank
     notes and deposit notes
   – foreign government securities (e.g.,
     Japanese Treasury bills)
   – bankers’ and trade acceptances
                                                79
            Short-Term Debt

• Security type = 5 (short-term commercial paper)
   – short-term commercial paper
   – short-term financial paper
   – short-term asset-backed commercial paper
• Security type = 6 (short-term negotiable CDs)
   – short-term negotiable certificates of deposit
   – short-term bank notes
   – short-term deposit notes
                                                     80
          Short-Term Debt

• Security type = 8 (other short-term debt)
   – short-term foreign government securities
   – short-term bankers’ and trade acceptances
   – short-term notes
   – all other foreign short-term debt not
     specified in security types 5, 6, and 7

                                            81
           Long-Term Debt
• Reportable long-term debt includes the following
  instruments where the original maturity is greater
  than one year:
   – bonds
   – notes
   – debentures
   – stripped and zero coupon securities
   – convertible debt
   – negotiable certificates of deposit

                                                       82
               Long-Term Debt

• Security type = 9 (stripped and zero coupon long-term debt)
   – long-term zero coupon bonds and notes
   – long-term stripped securities where the host
     security is not an asset-backed security (both
     the IO and PO components)
• Security type = 10 (convertible long-term debt)
   – long-term convertible debt
   – long-term zero coupon convertible debt
                                                                83
            Long-Term Debt

• Security type = 12 (other long-term debt)
   – long-term CDs, bank notes and deposit notes
   – Brady bonds
   – covered bonds (e.g., Pfandbrief)
   – debt securities backed by a sinking fund
   – all other foreign long-term debt not specified in
     security types 9, 10, and 11

                                                     84
          Long-Term Debt
         Stripped Securities

• Reportable stripped securities are those
  where the issuer of the stripped security is a
  foreign-resident entity.
• Residency of the stripped security is not
  determined by the issuer of the underlying
  security.

                                               85
            Long-Term Debt
           Stripped Securities

• Foreign securities that are the underlying
  securities for stripped securities, should be
  reported by the U.S. holder.

• Stripped securities issued by a U.S.-resident entity
  should not be reported, even if the underlying
  security is foreign.
                                                     86
        Long-Term Debt
  Stripped Securities Example

• U.S. Company A owns $100 million of German
  bonds. U.S. Company A issues stripped securities
  where these German bonds are the underlying
  securities. U.S. Company B purchases these
  stripped securities.

• What should Company A and B report?
                                                 87
           Long-Term Debt
  Stripped Securities Example Answer
• U.S. Company A owns $100 million of German bonds.
  U.S. Company A issues stripped securities where these
  German bonds are the underlying securities. U.S.
  Company B purchases these stripped securities.
• What should Company A and B report?
• Company A reports the ownership of $100 million of
  German bonds. The stripped securities are not reported
  by either company.


                                                    88
              Debt Exclusions

• Exclude from short-term and long-term debt:
   – shares/units in foreign-resident funds, even if
     the foreign fund invests in debt.

   – investments in foreign-resident funds are
     reported, but should be classified as equity on
     this report.

                                                       89
            Debt Exclusions

• Exclude from short-term and long-term
  debt:
   – loans
   – trade credits
   – accounts receivable
   – derivatives
   – non-negotiable certificates of deposit
                                              90
            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.

                                              91
      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.



                                             92
      Asset-Backed Securities
• Reportable asset-backed securities are those
  where the issuer securitizing the assets is a
  foreign resident.

• The underlying asset is not a factor in
  determining whether the ABS is a foreign
  security.

                                              93
      Asset-Backed Securities

• Reportable asset-backed securities include:
  – collateralized mortgage obligations
    (CMOs)
  – collateralized bond obligations (CBOs)
  – collateralized loan obligations (CLOs)
  – collateralized debt obligations (CDOs)
                                                94
       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
                                                95
       Asset-Backed Securities

• Security type = 7 (short-term asset-backed securities)
   – short-term asset-backed securities
• Security type = 11 (long-term asset-backed securities)
   – long-term asset-backed securities
   – long-term stripped securities where the host
     security is an asset-backed security (including
     the IO and PO components and the tranches)


                                                           96
       Asset-Backed Securities
             Exclusions
• Exclude from asset-backed securities:
   – asset-backed commercial paper
   – Brady bonds
   – securities backed by a sinking fund
   – covered bonds (e.g., Pfandbrief)
• These securities are reported but should be
  classified as short-term or long-term debt on this
  report.

                                                       97
   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.



                                            98
   Repurchase Agreements
Security Lending Arrangements

• The security lender should report the
  foreign security as if no repo or security
  lending arrangement occurred.
• The security borrower should exclude the
  foreign security.

                                               99
100
Review of Schedules




    Richard McGee
        Review of Schedules
            Schedule 1

• Schedule 1: Reporter Contact Identification and
  Summary Financial Information
• Required to be filed by all organizations who
  received the report
• Contains basic information about the institution
• Contains summary financial information reported
  on Schedule 2 and 3


                                                 102
        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 if
    you do not know your identification
    number.
  – Do not report tax ID in this field
                                                103
       Review of Schedules
           Schedule 1
• Reporting Status (Line 3)

  – Only Schedule 2(s).
  – Only Schedule 3(s).
  – Schedule 2(s) and Schedule 3(s).



                                       104
        Review of Schedules
            Schedule 1

• Industrial Classification Code (Line 4)
  – 9 categories.
  – Choose classification code that best describes
    your organization.
  – If two or more codes are appropriate choose the
    one that represents the largest portion of your
    organization’s day-to-day operations.

                                                 105
           Review of Schedules
               Schedule 1
• Name of Service Provider or Vendor Used (Line 10)
   – The institution that provided your data or prepared the
     electronic files.
• Technical Contact (Line 11 - 14)
   – Provide the name of the person who can answer questions
     regarding the electronic submission of your data.
   – This person should be familiar with the file format(s) used
     and how the data was extracted from your databases or
     applications.

                                                               106
       Review of Schedules
           Schedule 1
• Valuation Techniques (Line 15)
  – Describe the valuation techniques used by each
    reporting unit.
  – Did your organization report securities with a
    zero market value. If so, why?
  – How are inactively traded securities valued?
  – How are securities with internally generated
    IDs valued?
                                                107
         Review of Schedules
             Schedule 1
• Schedule 2 & Schedule 3 Summary
  Information
  –   Total number of Schedule 2 & Schedule 3 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.


                                                    108
         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 from within your organization is
    responsible for certifying your data submission.



                                                  109
       Review of Schedules
           Schedule 2

• Schedule 2: Details of Securities
• Filed by U.S.-resident custodians and U.S.-
  resident end-investors
• Provides details of each foreign security
• Total of all Schedule 2 US$ market values
  should equal the summary financial
  information reported on Schedule 1
                                            110
       Review of Schedules
           Schedule 2
• Sequence Number (Line 2)
  – Sequence numbers should be sequential (i.e.,
    1,2,3) 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.

                                                 111
       Review of Schedules
           Schedule 2
• Reporting Unit Fields (Lines 3a & 3b)

  – Reporting Unit Code - 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.
  – Name of Reporting Unit - Enter a
    description or name of the reporting unit or
    division that is reporting the information.
                                                   112
          Review of Schedules
              Schedule 2
• Security ID Fields (Lines 4 & 6)
  – Security ID - The security ID code used to
    identify the reported security. ISIN codes and
    CUSIPs are strongly preferred.
  – Security ID System - Enter the appropriate code
    from appendix C in this field. For example, if the
    security ID is an ISIN a 4 should be entered in this
    field.


                                                     113
        Review of Schedules
            Schedule 2
• Text Descriptions (Lines 5 & 9)

  – Security Description - A brief description of
    the security reported. (Line 5)

  – Name of Issuer - The full legal name of the
    organization that issued the security. (Line 9)

                                                      114
        Review of Schedules
            Schedule 2

• Security Type (Line 7)
  – Equity securities have the following categories:
     • common stock (1)
     • preferred stock (2)
     • funds (including shares or unit trusts) (3)
     • other: any other type of equity security not
       listed above (4)

                                                   115
            Review of Schedules
                Schedule 2
• Security Type (Line 7)
  – Short-term debt has four categories:
     •   short-term commercial paper (5)
     •   short-term negotiable CDs (6)
     •   short-term asset-backed securities (7)
     •   all other short-term debt or selected money market
         instruments (8)
           – Examples are foreign treasury bills, short-term
              notes, and stripped securities with a maturity of one
              year or less.
                                                                116
        Review of Schedules
            Schedule 2
• Security Type (Line 7)
   – Long-term debt has four categories:
     • stripped and zero coupon long-term debt (9)
     • convertible long-term debt (10)
     • long-term asset-backed securities (11)
     • all other long-term debt (12)
         – Examples are long-term negotiable cds,
           Brady bonds.
                                                 117
         Review of Schedules
             Schedule 2

• Depositary Receipt Share - Indicates whether or not
  an equity security is a depositary receipt. (Line 8)

• Intentionally Left Blank - This field corresponds to
  a previous data item no longer collected. Leave this
  field blank or enter a null value. (Line 10)



                                                  118
        Review of Schedules
            Schedule 2
• Country & Currency Fields (Lines 11 &12)

  – Country of Issuer - Enter the country code found in
    Appendix D that corresponds to the country of
    residence of the entity that issued the security.

  – Currency of Denomination - Enter the ISO code from
    Appendix F that corresponds to the currency in which
    the security being reported is denominated.

                                                          119
       Review of Schedules
           Schedule 2
• Ownership Code (Line 13)

  – An ownership code must be supplied for each
    security.
  – A single security ID can have different
    ownership codes.
  – Security IDs with like information but differing
    ownership codes must be reported on individual
    Schedule 2 reports and cannot be aggregated.
                                                  120
            Fair (Market) Value
• Report the fair (market) value of securities as of close
  of business December 31.
• The fair (market) value follows the definition of FAS
  115.
• Fair value is the amount at which an asset could be
  bought or sold in a current transaction between willing
  parties, other than in a forced or liquidation sale.

• If a quoted market price is available for an instrument,
  the fair (market) value is the product of the number of
  trading units times that market price.
                                                       121
            Fair (Market) Value

• For Securities that do not regularly trade, the estimate
  of fair value should be based on the best information
  available in the circumstances.

• The estimate of fair value should consider prices for
  similar assets and the results of valuation techniques to
  the extent available in the circumstances.

• Examples of valuation techniques include discounted
  cash flow, matrix pricing, option-adjusted spread
  models and fundamental analysis.
                                                       122
          Fair (Market) Value
• US$ Fair (Market) Value of Security Held (Line 14a)
  – Enter the US$ fair (market) value.

• Fair (Market) Value of Security Held Denominated
  in Currency of Issue (Line 14b)
   – 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. In these cases line
     items 14a and 14b will be equal.
                                                      123
         Fair (Market) Value

• If the fair (market) value is determined to be zero
  list the reason why on line 15 of Schedule 2.

• Examples of zero fair (market) value are:
   – Securities that are thinly or never traded.
   – Stock is impaired or security in default.
   – Organization that issued the security is in
     receivership.
                                                    124
        Fair (Market) Value

• Fair (market) value is calculated as:
  – Equity
     • Number of Shares * Price
  – Short and long-term debt
     • Face Value * Price
  – Asset-backed securities
     • Remaining Principal Outstanding * Price

                                                 125
  Foreign Exchange Conversion

• Converting foreign currency to U.S. dollar

  – If the exchange rate is stated as foreign
    currency per U.S. dollar then you must divide
    to get the U.S. dollar equivalent.

  – If the exchange rate is stated as U.S. dollar per
    foreign currency then you must multiply to get
    the U.S. dollar equivalent.
                                                    126
   Foreign Exchange Conversion
            Example 1
• Exchange rate quoted in units of foreign currency
  per US$.
   – The exchange rate as of 12/31/03 should be used when
     reporting.
   – Japanese denominated security with a fair (market)
     value of ¥300,000.
   – If the closing exchange rate were ¥105.75/US$.
   – Divide the foreign currency value by the foreign
     exchange rate and round to the US$ value.
   – ¥300,000/105.75 = US$2,836.879 (US$2,837).
                                                        127
   Foreign Exchange Conversion
            Example 2

• Exchange rate quoted in units of US$ per foreign
  currency.
   – The exchange rate as of 12/31/03 should be used when
     reporting.
   – British pound denominated security with a fair
     (market) value of £2,000.
   – If the closing exchange rate were $1.45/UK£.
   – Multiply the foreign currency value by the foreign
     exchange rate and round to the US$ value.
   – £2,000 * 1.45 = $2,900.
                                                        128
 Reporting an Equity Security


• Security type must be either 1, 2, 3 or 4.
• Depositary share indicator, line item 8, must be
  completed.
• Number of Shares Held, line item 16, must be
  provided.
• Line items 17 through 23 pertain to debt securities
  and should be left blank or null.

                                                   129
     Reporting a Debt Security
     Other Than Asset-Backed
• Security type must be either 5, 6, 8, 9, 10 or 12.
• The face value in the currency of denomination must be
  reported. Face value should be the same currency reported in
  line items 12 and 14b.
• 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 (Line 18) and a maturity date (Line 19) must
  be reported.
                                                           130
   Reporting an Asset-Backed
           Security

• Security type should be either 7 or 11.
• The original face value in the currency of
  denomination must be reported. Original face
  value should be the same currency reported in line
  items 12, 14b and 21.
• Original face value is the amount that would still
  be outstanding if no principal had been repaid.

                                                  131
   Reporting an Asset-Backed
           Security

• Remaining principal outstanding in currency of
  denomination must be reported. Same currency as
  12, 14b and 20.

• The remaining principal outstanding will only
  equal the original face value if no principal has
  been repaid.

                                                      132
   Reporting an Asset-Backed
           Security

• Original face value and remaining principal
  outstanding should be rounded to the nearest
  whole currency unit.
• If the security is traded in units, report the original
  face value and remaining principal outstanding by
  multiplying each unit by the number of units held.
• An issue date and a maturity date must be
  reported.
                                                       133
      Review of Schedules
 Schedule 3 for “Schedule 2 and
     Schedule 3” Reporters
• Multiple Schedule 3 records can be reported.

• A custodian code from Appendix G must be
  reported in line 3.

• If your organization’s U.S.-resident custodian
  does not appear in Appendix G, lines 9 through 14
  of the Schedule 3 must be completed.
                                                  134
      Review of Schedules
 Schedule 3 for “Schedule 2 and
     Schedule 3” Reporters
• The aggregate fair market value of the securities
  entrusted to the custodian indicated in line 3 must
  be provided on lines 4 through 7.
• Your organization must indicate whether it is
  reporting as an end investor or a U.S.-resident
  custodian (Line 8).
• Schedule 3 Only reporters are required to submit
  up to two additional Schedule 3 reports using
  custodian code 77 or 88 (Line 3).
                                                    135
     Review of Schedules
Schedule 3 for Schedule 3 Only
          Reporters
• Reporting custodian code 77
  – Submit a separate Schedule 3 containing
    summary data on foreign securities held
    directly with foreign-resident custodians.
  – This includes:
     • foreign-resident offices of U.S. banks
     • foreign-resident offices of U.S. broker/dealers
     • foreign-resident central securities depositories
                                                          136
     Review of Schedules
Schedule 3 for Schedule 3 Only
          Reporters

• Reporting custodian code 88
  –    Submit a separate Schedule 3 containing
      summary data on foreign securities:
       • held directly by the reporting organization
       • entrusted to U.S.-resident central securities
         depositories

                                                         137
Key Issues for Reporters




        Sarit Kessel
          Reporting Criteria

• Custodians should report foreign securities
  held in custody for other U.S. residents.

• Custodians should report their own foreign
  securities.



                                            139
      Securities to be Included

• Report all securities issued by foreign-
  resident entities, including international and
  regional organizations, held by U.S.
  residents.
• Report all American Depositary Receipts
  (ADRs) that represent ownership of foreign
  corporations that are held by U.S. residents.

                                              140
      Securities to be Included


• Report all foreign securities, even if the
  security is restricted.
• Report all U.S. held foreign securities that
  have been entrusted to a foreign-resident
  custodian.


                                                 141
      Securities to be Included


• Report all U.S. held foreign securities that
  have been entrusted to a U.S.-resident
  central securities depository (such as the
  Depository Trust Company) or foreign-
  resident central securities depository (such
  as Euroclear).

                                                 142
               Security IDs

• Whenever possible, report securities using
  the ISIN or CUSIP Code.
• If unavailable, use appropriate SEDOL,
  CINS, Common, or other exchange-
  assigned code.
• Use internal codes only if no other code
  exists for the security.

                                               143
       FRBNY Calculations

• FRBNY calculates implicit prices, factor
  values, and exchange rates based on market
  values and quantity fields submitted by
  reporters.
   – Helps FRBNY determine the quality of
     market values and quantities.


                                           144
How FRBNY Calculates Prices


• An implicit price for equity is calculated by
  dividing the US$ fair (market) value (line
  14a) by the number of shares (line 16).




                                              145
 How FRBNY Calculates Prices
        Example 1

• If the US$ fair (market) value is
  $10,000,000 and the number of shares is
  100,000, what is the implicit price?




                                            146
How FRBNY Calculates Prices
     Example 1 Answer

• If the US$ fair (market) value is
  $10,000,000 and the number of shares is
  100,000, what is the implicit price?
• Implicit Price = US$ fair (market) value/
  Number of shares
• $100 = $10,000,000 / 100,000

                                              147
 How FRBNY Calculates Prices


• An implicit price for non-ABS debt is
  calculated by dividing the fair (market)
  value in currency of denomination
  (line 14b) by the face value in currency of
  denomination (line 17).



                                                148
How FRBNY Calculates Prices
       Example 2

• If the fair (market) value in currency of
  denomination is $1,000,000 and the face
  value in currency of denomination is
  $900,000, what is the implicit price?




                                              149
How FRBNY Calculates Prices
     Example 2 Answer
• If the fair (market) value in currency of
  denomination is $1,000,000 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 / Face value in
  currency of denomination
• 1.11 = $1,000,000 / $900,000
                                                 150
  How FRBNY Calculates Prices

• An implicit price for asset-backed securities
  is calculated by dividing the fair (market)
  value in currency of denomination (line
  14b) by the remaining principal outstanding
  in currency of denomination (line 21).


                                              151
How FRBNY Calculates Prices
       Example 3

• 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?

                                           152
How FRBNY Calculates Prices
     Example 3 Answer
• 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 / Remaining
  principal outstanding in currency of
  denomination.
• 0.909 = ¥ 100,000 / ¥ 110,000
                                                 153
  How FRBNY Calculates Factor
          Values

• The factor value for asset-backed securities
  is calculated by dividing the remaining
  principal outstanding in currency of
  denomination (line 21) by the original face
  value in currency of denomination (line 20).



                                             154
  Calculation of Factor Values
            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
  factor value?


                                           155
  Calculation of Factor Values
       Example Answer
• If the original face value outstanding in currency of
  denomination is £900,000 and the remaining
  principal outstanding in currency of denomination
  is £700,000, what is the factor value?
• Factor Value = Remaining principal
  outstanding in currency of denomination /
  Original face value in currency of
  denomination.
• .78 = £ 700,000 / £ 900,000                       156
     How FRBNY Calculates
        Exchange Rates
• The implicit exchange rate is calculated by
  dividing the US$ Fair (Market) Value (line
  14a) by the Fair (Market) Value in Currency
  of Denomination (line 14b).




                                           157
Calculation of Exchange Rates
          Example

• If the US$ Fair (Market) Value is $100,000
  and the Fair (Market) Value in Currency of
  Denomination is £80,000, what is the
  exchange rate?




                                           158
Calculation of Exchange Rates
      Example Answer
• If the US$ Fair (Market) Value is $100,000
  and the Fair (Market) Value in Currency of
  Denomination is £80,000, what is the
  exchange rate?
• Exchange Rate = US$ Fair (Market) Value /
  Fair (Market) Value in Currency of
  Denomination.
• 1.25 = $100,000 / £ 80,000
                                          159
    Common Reporting Errors

• Securities reported with an amount held
  equal to zero.
• Securities reported with inaccurate security
  types (zero-coupon bonds reported as all
  other long-term debt).
• Securities reported with maturity dates prior
  to the as-of date.
                                              160
    Common Reporting Errors

• Failure to report remaining principal
  outstanding for asset-backed securities.
• Incorrectly reporting preferred stock as
  debt. (All preferred stock should be
  reported as equity).
• Failure to report foreign securities owned
  by U.S.-resident funds.
                                               161
        U.S.-Resident Funds
             Example 1

• If a U.S.-resident fund owns foreign
  securities, are these securities reportable?




                                                 162
        U.S.-Resident Funds
        Example 1 Answer

• If a U.S.-resident fund owns foreign
  securities, are these securities reportable?
• Yes. The foreign securities are reportable
  because the fund is incorporated in the U.S.



                                             163
        U.S.-Resident Funds
             Example 2

• If shares of a Caribbean fund, which is
  incorporated in the U.S., are purchased by a
  U.S.-resident are they reportable?




                                             164
        U.S. Resident Funds
        Example 2 Answer
• If shares of a Caribbean fund, which is
  incorporated in the U.S., are purchased by a
  U.S.-resident are they reportable?
• No. Since the fund is incorporated in the
  U.S., the shares held by U.S. residents are
  not reportable.


                                             165
     Common Reporting Errors

• Incorrectly calculated foreign currency
  market values.
• Defaulting currency to match country of
  issuer.
• Identifying securities as U.S. or foreign
  based on the first two letters in ISIN or first
  letter in CINS ID.
                                                166
Identify Securities Examples

    Question:
    Is ISIN
    US902118AU26
    reportable?



                               167
 Identify Securities Examples

Question:       Answer:
Is ISIN         Yes, because it is
US902118AU26    issued by Tyco
                International which is
reportable?     incorporated in
                Bermuda.



                                  168
 Identify Securities Examples
Question:       Answer:
Is ISIN         Yes, because it is
US902118AU26    issued by Tyco
                International which is
reportable?     incorporated in
                Bermuda.
Is ISIN
US01F0626485
reportable?
                                 169
  Identify Securities Examples
Question:        Answer:
Is ISIN          Yes, because it is
US902118AU26     issued by Tyco
                 International which is
reportable?      incorporated in
                 Bermuda.
Is ISIN          No, because it is issued
US01F0626485     by the Federal National
                 Mortgage Association
reportable?      (Fannie Mae).
                                   170
Identify Securities Examples

  Question:
  Is ISIN
  XS0077101433
  reportable?




                               171
 Identify Securities Examples

Question:       Answer:
Is ISIN         No, because it is
XS0077101433    issued by the Federal
                Home Loan Mortgage
reportable?     Corporation




                                172
 Identify Securities Examples
Question:       Answer:
Is ISIN         No, because it is
XS0077101433    issued by the Federal
                Home Loan Mortgage
reportable?     Corporation.

Is ISIN
XS001087137
reportable?                     173
 Identify Securities Examples
Question:       Answer:
Is ISIN         No, because it is
XS0077101433    issued by the Federal
                Home Loan Mortgage
reportable?     Corporation.

Is ISIN         Yes, because it is
                issued by the Inter-
XS001087137     American
reportable?     Development bank.
                                 174
    Common Reporting Errors

• Failure to report securities issued by
  reincorporates, such as Tyco, Transocean,
  and Ingersoll-Rand.
• Failure to report securities issued by
  companies that are thought to be domestic,
  but are foreign incorporated, such as
  Schlumberger and Carnival Corp.
                                           175
How We Review Your Data

Report of U.S. Ownership of Foreign
Securities, Including Money Market
        Instruments (SHCA)




             Tim Grob
        Four 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
• Schedule 2/3 Comparison
   – Comparing schedule 3 data to schedule 2 data
                                                          177
     Reporter Level Review
Reasonability Comparisons
  – Schedule 1 -vs- schedule 2 comparison
  – Schedules 1, 2 & 3 comparison to prior
    year (reporting trends)
  – Ownership code
  – Market values
  – Face values
  – Number of shares
                                             178
       Reporter Level Review
Reasonability Analysis
• Ensuring all schedule 2 data was reported, to
  include:
   – Security IDs
   – Ownership code
   – Number of shares held
   – Face Value held
   – Remaining principal (ABS)
                                                  179
      Reporter Level Review
Reasonability
• Currency/Exchange Rate Analysis
  – Currency is US$ but US market value (item 14a) does
    not equal the market value in the currency of
    denomination (item 14b).
  – Currency is not US$ and the exchange rate is not 1, but
    the US$ market value equals the market value in the
    currency of denomination.
  – For each security, an implicit exchange rate is
    calculated, which should be the December 31, 2003
    exchange rate for the currency.
                                                         180
       Reporter Level Review
Reasonability
• Country of Issuer
• Country of Issuer is U.S.
   – Are these coded incorrectly or should these have been
     excluded from your report?
   – Are securities issued by international and regional
     organizations miscoded, and reported with the U.S. as the
     country of issuer?
   – Are securities issued by a U.S. protectorate (Puerto Rico,
     etc.)? If so, exclude from report.

                                                           181
      Reporter Level Review
Reasonability
• Country of Issuer
• Country of Issuer is Canada
   – Has the amount of securities issued by Canadian
     entities changed substantially since the last
     reporting cycle?
   – Were Canadian securities coded as US securities
     on your system and so were incorrectly excluded
     from your report?
                                                 182
      Reporter Level Review
Reasonability
• American Depositary Receipts (ADRs)
• Comparison of the reported market value and
  proportion of ADRs relative to total equity

   – Did you report any ADRs?

   – Did you previously? If so, has your
     position changed significantly?

                                                183
     Reporter Level Review
Reasonability
• Ownership Code Analysis
  – Have the market values and proportions
    of the total market value of securities
    reported as owner and as custodian,
    changed substantially?
  – Are you reporting any securities as
    owner?

                                              184
     Reporter Level Review
Reasonability
• Key Securities Analysis
  – Largest securities by market value
     • Implicit exchange rates, implicit prices,
       country of issuer, etc.
  – Securities reported with zero quantities
     • If reported correctly, these securities do not
       need to be reported, and should be excluded
       from future reports
                                                    185
     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.
     • debt prices far above par
     • issue dates after as-of date
     • maturity dates prior to as-of date
     • additional comparisons to other reporters’ data     186
     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 implied price of $59.50
  – Stock A reported with implied price of $60.15

                                                187
       Security Level Review

Search for Reincorporated Organizations
• Entities that were formerly incorporated in the
  United States but are now incorporated elsewhere.
• Please view the list of Reincorporates in your
  packet




                                                 188
        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 U.S. resident.
• Total amount held reported across all reporters is
  compared to the total amount outstanding for a given
  security.
                                                   189
          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


                                                      190
        Macro Level Review
Comparisons of various “cuts” of the
 aggregate data

• ADRs by country
• Debt by maturity date
• Debt by coupon

• Published data can be found at
  http://www.ustreas.gov/tic/fpis.html
                                         191
         Schedule 2/3 Review


 (Market Values       (Market values
by security type,       attributed) to
from Schedule 2s        each custodian
                        on Schedule 3 by
and 3s) reported by
                        its customers.
each custodian

                                     192
      Want to Know More?


• If you’d like more details about how we
  analyze your data, please contact us to
  arrange a meeting.




                                            193
Benchmark (SHCA)/TIC
     Comparison




      Kenneth Aberbach
         Reports Used for
           Comparison
• U.S. Ownership of Foreign Securities (SHCA
  or Claims)
• TIC Reports
  – TIC BQ-1 Customer Claims
  – TIC BQ-2 Customer and own claims denominated
    in foreign currency
  – TIC BC Own Claims
  http://www.ustreas.gov/tic/
                                            195
              Differences

• TIC - Face Value
  – SHCA - Face Value and Market Value


• TIC - Aggregate per country
  – SHCA - Detailed information on each security




                                               196
               Differences

• TIC - Long-term and short-term negotiable
  CDs are combined
  – SHCA - Long-term and short-term negotiable
    CDs are separated by security type
• TIC - USD or USD equivalent
  – SHCA - Market Value in both USD and
    currency of denomination. Face value in
    currency of denomination that FRBNY
    converts to USD.
                                                 197
              Differences

• There may be more than one TIC report
  filed per institution.
• One consolidated SHCA 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 SHCA report.

                                               198
       Compare - Overview

• Negotiable certificates of deposits

• Commercial Paper

• Other short-term negotiable securities

• Foreign currencies
                                           199
       Compare - Overview


• Securities held in custody

• Securities owned by the reporter




                                     200
            Compare
   Short-Term Negotiable CDs
• SHCA (per country)         • TIC BQ-1 (per
  – Security Type 6 (Item      country)
    7)                         – Negotiable CDs
  – Currency = USD (Item         (column 2)
    12)                        – Note: Long term CDs
  – Ownership code 2, 3, 4       (original maturity of
    and 5 (item 13)              over one year) are also
  – Sum of face value            included in this column
    (Item 17)                    but would be coded as
                                 Sec. Type 12 on SHCA
                                                   201
            Compare
   Short-Term Negotiable CDs
• SHCA (per country)         • TIC BQ-2 (per
  – Security Type 6 (Item      country)
    7)                         – Other Customers’
  – Currency not = USD           Claims (column 6)
    (Item 12)                  – Note - CDs are just one
  – Ownership code 2, 3, 4       of many items that can
    and 5 (item 13)              be reported in this
  – Sum of face value            column.
    (Item 17)

                                                  202
         Compare
 Short-Term Negotiable CDs
        Memo Item
• SHCA                       • TIC BQ-2
  – Security Type 6 (Item      – Negotiable CDs (row
    7)                           line 8110-8, column 6)
  – Currency not = USD
    (Item 12)
  – Ownership code 2, 3, 4
    and 5 (item 13)
  – Sum of face value
    (Item 17)
                                                     203
           Compare
 Other Short -Term Negotiable
          Securities
• SHCA (per country)         • TIC BQ-1 (per
  – Security Types 5, 7        country)
    and 8 (Item 7)             – All Short-Term
  – Currency = USD (Item         Negotiable Securities
    12)                          (column 3)
  – Ownership code 2, 3, 4
    and 5 (item 13)
  – Sum of face value
    (Item 17)

                                                  204
        Compare
Commercial Paper Memo Item
• SHCA                       • TIC BQ-1
  – Security Type 5 (Item      – Commercial Paper
    7)                           (row line 8161-2,
  – Currency = USD (Item         column 3)
    12)
  – Ownership code 2, 3, 4
    and 5 (item 13)
  – Sum of face value
    (Item 17)


                                               205
           Compare
  Other Short-Term Negotiable
           Securities
• SHCA (per country)         • TIC BQ-2 (per
  – Security Types 5, 7        country)
    and 8 (Item 7)             – Other Customers’
  – Currency not = USD           Claims (column 6)
    (Item 12)                  – Note - As mentioned
  – Ownership code 2, 3, 4       before there are other
    and 5 (item 13)              items reportable in this
  – Sum of face value            column.
    (Item 17)

                                                   206
           Compare
  Other Short-Term Negotiable
     Securities Memo Item
• SHCA                        • TIC BQ-2
  – Security Type 5, 7 or 8     – Short-Term Negotiable
    (Item 7)                      Securities (row line
  – Currency not = USD            8120-5, column 6)
    (Item 12)
  – Ownership code 2, 3, 4
    and 5 (item 13)
  – Sum of face value
    (Item 17)

                                                     207
           Compare
    Own Short-Term Securities
• SHCA (per country)          • TIC BC (per country)
  – Security Type 5 or 6 or     – Negotiable CDs and All
    7 or 8 (Item 7)               Short Term Negotiable
  – Currency = USD (Item          Securities (column 2 +
    12)                           column 4)
  – Ownership code 1            – Note: Long term CDs
    (item 13)                     (original maturity of
  – Sum of face value             over one year) are also
    (Item 17)                     included in column 2
                                  but would be coded as
                                  Sec. Type 12 on SHCA
                                                   208
           Compare
    Own Short-Term Securities
• SHCA (per country)          • TIC BQ-2 (per
  – Security Type 5 or 6 or     country)
    7 or 8 (Item 7)             – Other Claims
  – Currency not = USD            (column 4)
    (Item 12)                   – Note: Short-term
  – Ownership code 1              securities are just
    (item 13)                     one of many items
  – Sum of face value             that can be reported
    (Item 17)                     in this column.

                                                  209
         Compare
 Own Short-Term Negotiable
     CDs Memo Item
• SHCA                      • TIC BQ-2
  – Security Type 6 (Item     – Negotiable CDs (row
    7)                          line 8110-8, column 4)
  – Currency not = USD
    (Item 12)
  – Ownership code 1
    (item 13)
  – Sum of face value
    (Item 17)
                                                    210
            Compare
    Own Other Short-Term
Negotiable Securities Memo Item
• SHCA                        • TIC BQ-2
  – Security Type 5, 7 or 8     – Short-Term Negotiable
    (Item 7)                      Securities (row line
  – Currency not = USD            8120-5, column 4)
    (Item 12)
  – Ownership code 1
    (item 13)
  – Sum of face value
    (Item 17)
                                                  211
                 Compare
              Data by currency

• SHCA                       • TIC BQ-2
  – Security Type 5, 6, 7      – Denominated in
    or 8 (Item 7)                Canadian Dollars (row
  – Currency = CAD               line 8500-1, column 4)
    (Canadian Dollar, Item     – Note: Short-term
    12)                          securities are just one
  – Ownership code 1             of many items that can
    (item 13)                    be reported in this
  – Sum of face value            column.
    (Item 17)
                                                  212
                 Compare
              Data by currency

• SHCA                      • TIC BQ-2
  – Security Type 5, 6, 7     – Denominated in Euros
    or 8 (Item 7)               (row line 8500-2,
  – Currency = EUR              column 4)
    (Euros, Item 12)          – Note: Short-term
  – Ownership code 1            securities are just one
    (item 13)                   of many items that can
  – Sum of face value           be reported in this
    (Item 17)                   column.

                                                   213
               Compare
            Data by currency

• SHCA                      • TIC BQ-2
  – Security Type 5, 6, 7     – Denominated in
    or 8 (Item 7)               Sterling (row line
  – Currency = GBP              8500-3, column 4)
    (Sterling, Item 12)       – Note: Short-term
  – Ownership code 1            securities are just one
    (item 13)                   of many items that can
  – Sum of face value           be reported in this
    (Item 17)                   column.

                                                     214
                Compare
             Data by currency

• SHCA                      • TIC BQ-2
  – Security Type 5, 6, 7     – Denominated in Yen
    or 8 (Item 7)               (row line 8500-4,
  – Currency = JPY (Yen,        column 4)
    Item 12)                  – Note: Short-term
  – Ownership code 1            securities are just one
    (item 13)                   of many items that can
  – Sum of face value           be reported in this
    (Item 17)                   column.

                                                   215
                 Compare
              Data by currency

• SHCA                       • TIC BQ-2
  – Security Type 5, 6, 7      – Denominated in
    or 8 (Item 7)                Canadian Dollars (row
  – Currency = CAD               line 8500-1, column 6)
    (Canadian Dollar, Item     – Note: Short-term
    12)                          securities are just one
  – Ownership code 2, 3, 4       of many items that can
    and 5 (item 13)              be reported in this
  – Sum of face value            column.
    (Item 17)
                                                    216
                Compare
             Data by currency

• SHCA                       • TIC BQ-2
  – Security Type 5, 6, 7      – Denominated in Euros
    or 8 (Item 7)                (row line 8500-2,
  – Currency = EUR               column 6)
    (Euros, Item 12)           – Note: Short-term
  – Ownership code 2, 3, 4       securities are just one
    and 5 (item 13)              of many items that can
  – Sum of face value            be reported in this
    (Item 17)                    column.

                                                      217
                Compare
             Data by currency

• SHCA                       • TIC BQ-2
  – Security Type 5, 6, 7      – Denominated in
    or 8 (Item 7)                Sterling (row line
  – Currency = GBP               8500-3, column 6)
    (Sterling, Item 12)        – Note: Short-term
  – Ownership code 2, 3, 4       securities are just one
    and 5 (item 13)              of many items that can
  – Sum of face value            be reported in this
    (Item 17)                    column.

                                                    218
                Compare
             Data by currency

• SHCA                       • TIC BQ-2
  – Security Type 5, 6, 7      – Denominated in Yen
    or 8 (Item 7)                (row line 8500-4,
  – Currency = JPY (Yen,         column 6)
    Item 12)                   – Note: Short-term
  – Ownership code 2, 3, 4       securities are just one
    and 5 (item 13)              of many items that can
  – Sum of face value            be reported in this
    (Item 17)                    column.

                                                    219
  Technical Topics

Preparing a file of your data




        Melissa Harris
             Technical Topics
            What to File Electronically

Electronically:            On paper:
• Schedule 2               • Schedule 1
   – Required if           • Schedule 3
     submitting more       • Schedule 2
     than 200 records         – Optional if
   – Optional if                submitting 200 or
     submitting 200 or          fewer records
     fewer records
                                              221
        Technical Topics:
           Media Requirements


• High Density IBM Compatible Diskette
• 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
                                           222
        Technical Topics:
           Unacceptable Media



• No IBM Mainframe Tapes/Cartridges -
  3480/3490, Round (Reel) Tapes
• No EBCDIC Files
• No Compressed Files



                                        223
         Technical Topics:
                File Formats



Use Either of Two File Formats:

• Positional
• Semi-colon Delimited



                                  224
  Technical Topics
Correct Positional File Example




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


                                           225
                                          225
  Technical Topics
Correct Positional File Example




                        Face Value (Non-ABS)
                        Debt Only - NULL
                     Filler (space)
                Number of Shares Held




                                         226
                                        226
  Technical Topics
Correct Positional File Example




                                            Maturity
                                              Date
                                    Filler (space)
                                        Issue Date
                                   Filler (space)
                       Face Value (Non-ABS) Debt Only
                     Filler (space)
             Number of Shares Held -NULL
                                              227
                                             227
           Technical Topics
      Incorrect Positional File Example




Reporting Unit
Description field begins
in the incorrect position,
22. The correct position
is 24.

                                           228
                                          228
    Technical Topics
 Correct Delimited File Example




              Name of Reporting Unit
    Delimiter
    Reporting Unit
    Delimiter
Sequence Number
Delimiter
Reporter ID




                                        229
                                       229
            Technical Topics
         Correct Delimited File Example




Intentionally                    Delimiters
Left Blank                       for 7 NULL Debt
                                 & ABS Items
                            Number of Shares Held
                            Reason for Zero - NULL
                         Fair Market Value


                                                  230
                                                 230
   Technical Topics
Incorrect Delimited File Example




                            Delimiters
                            for 7 NULL Debt
                            & ABS Items are
                            missing




                                        231
                                       231
                   Technical Topics
         Positional & Delimited Files Example




Number of shares
                            Face Value (Non-ABS) Debt Only




                                                         232
                                                        232
         Technical Topics
               Tips & Traps


• Files Must be Plain Text - Uncompressed
   – No .xls (Excel) files
   – No COBOL packed decimal fields
• Files Must be ASCII
• Diskette or CD Only



                                            233
         Technical Topics
               Tips & Traps
• Incorrect Date Format
   – Correct format MMDDYYYY. For
     example, the date May 3, 2003 would be
     reported as 05032003.
   – Examples of incorrect date formats
     MM/DD/YY, MM/DD/YYYY, MM-DD-
     YY, etc.
• Need to Have Leading Zeroes
   – Reporter ID, date fields
                                         234
          Technical Topics
                Tips & Traps


• Illegal 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#bench
  mark, the document is titled “Key Issues for
  SHCA Software Developers”


                                            235
            Technical Topics
                   Contacts
Melissa Harris   IT Support Analyst
                 (212) 720-7314

Amador Castelo   IT Support Analyst
                 (212) 720-8592

Susan Ma         Team Leader
                 (212) 720-1989

Howard Brickman Staff Director
                (212) 720-7759
                                      236
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