Rather than having to allocate two distinct ISIN codes, the Unitary ISIN represents one single global security in registered form which is deposited at an ICSD Common Depository. The consortium notes that only 15% of European issuer and 3% of Asian issuer 144As are currently set up within the "XS" Eurobond ISIN (ICSD) structure. However, the benefits are compelling: less administration, higher liquidity and no conversion processing.

• An "XS" 144A converts into an "XS" REG-S security up to 57% faster than if the 144A used a traditional "U.S." ISIN. This boosts liquidity and reduces settlement risks.
• Only XS ISIN securities offer collateral eligibility with the European Central Bank (ECB).
• One single security depository for REG-S and 144A issues halves the review time for admission and eligibility, and reduces the work for agent banks and counsels. 

Group findings in relation to using a Unitary ISIN

1. The Unitary ISIN (representing a single global security in registered form which is deposited at an ICSD) is increasingly popular and most importantly removes the need for REG-S/144A conversions altogether.
2. Liquidity is maximized within a Unitary ISIN. There is no arbitrage or mispricing, as when using two ISINs.
3. Security administration is absolutely minimal and distribution to investors is easy.
4. Clearstream can operationally accept a single ISIN approach and frequently does.
5. There is no change to the ICSD’s monitoring of the holders of the specified restrictions.
6. Hundreds of active Unitary ISIN securities have been issued over the past 2 years, with 45% coming from Corporate/Financial issuers and 55% coming from Sovereign issuers. Typical issue sizes range from USD 1 million to USD 1 billion.
7. Many agent banks advocate for increasing adoption of the Unitary ISIN as their processing time is halved for data entry, issuance, billings and payments.
8. Agent banks have no requirement to provide the investor holdings split to the ICSDs, or state what investors sit within settlement systems.
9. Investors should always be made aware that they are buying Unitary notes and that they must adhere to the regulations in place.
10. Lead managers may decide to update their agreements with institutional buyers to ensure that transfer restrictions are observed by them.

Regulation S and Rule 144A securities are both exempt from Securities and Exchange Commission (SEC) registration under the U.S. Securities Act. Bonds can be issued under one or another exemption, and often a bond issue will be issued under both Reg S and Rule 144A.

Group findings

Group findings in relation to innovating the REG-S/144A conversion process are:

1. All issuer legal documentation can be easily changed to support 144A tranches settling within the ICSDs as XS ISINs.
2. All major investors have ICSD accounts (either directly or indirectly).
3. U.S. agent banks are very open to the idea of removing their Medallion Stamp requests which speeds up U.S. security conversions (an area for continued group action).
4. Only 27% of Clearstream’s REG-S/144A yearly conversions both involve XS ISINs, despite this clearly being most beneficial to market efficiency.
5. Third party legal firms and data vendors also have an interest in more efficient conversions and security representation in general.

The consortium also promotes change within the paying agent community and the operational processes that are undertaken in conversions. This aims to boost the speed of all conversions.

Trustee exhibits

The consortium seeks to either remove exhibits completely or standardize them. Unnecessary exhibits are delaying conversions and are provided in a non-standard format. Our members suggest developing a standardized exhibit template.

Chill periods

The consortium wants to work with the industry to promote the proper application of chill periods. Paying agents can incorrectly quote a “coupon chill” during which conversions are halted. The group encourages agents to act with discretion and review wording and processes in detail.

Medallion stamp

The consortium seeks the removal of the stamp for European transactions. A few agent banks have led the way and removed it already. The consortium seeks industry-wide removal as the extra work involved in obtaining the signed stamp adds to the timeframe on transfers.