Capital markets fundamentals

The shape of the entity you are storing and the arithmetic you are allowed to do with it. An equity is close to a simple thing: one identifier, one quantity, one price, and a corporate-action feed that occasionally rewrites history. A bond has accrued interest, a day-count convention and a price quoted as a percentage of face value, so a naive quantity x price is wrong. A derivative has an underlying, an expiry and a contract multiplier, so its economic exposure is not its notional. Candidates who say "an instrument is an instrument" have usually only built equity systems, and the follow-up question is always about the one that does not fit their model.

Equities trade on visible order books with a last traded price, so valuation and position keeping are mostly bookkeeping. Fixed income is largely dealer quoted rather than exchange traded, so there may be no last trade for days, and price comes from a quote, a curve or an evaluated mark supplied by a vendor. Bonds also carry accrued interest between coupon dates, so the invoice price differs from the quoted price, and the same bond has a yield, a spread and a duration that all describe its price. The engineering consequence is that a fixed-income system needs a valuation dependency and a business-date calendar where an equity system needed neither.

Every FX trade is two currencies, so there is no single quantity — there is an amount in each leg and a rate relating them, and which one you consider the notional is a convention you must record rather than infer. Settlement is two payments in two national systems in two time zones, which is where the classic settlement risk lives: you pay before you are paid. It also trades nearly around the clock rather than in an exchange session, so "end of day" is a policy decision rather than a fact, and any system that assumed a daily close will need one chosen for it. Spot, forward and swap are distinct products sharing a pair.

A reference to something else, and a life with dates in it. A future or option points at an underlying, has an expiry, a contract multiplier and — for options — a strike and an exercise style, so the position is an exposure rather than a holding. That means valuation requires a model and inputs rather than a price lookup, risk is expressed as sensitivities rather than as market value, and the instrument itself expires, which is a scheduled event your system must handle rather than an exception. Over-the-counter derivatives add a bilateral contract with its own collateral terms, so the counterparty becomes part of the instrument's identity.

One company's ordinary shares, listed in one market, as the reference data actually arrives.

Instrument: a large UK-listed company, ordinary shares, London

  ISIN     GB00B03MLX29    12 chars, country prefix + national number + checksum
                           Identifies the SECURITY, not where it trades
  SEDOL    B03MLX2         7 chars, UK/Ireland numbering agency
                           Assigned per line of stock per market
  CUSIP    -               US/Canada scheme; a UK line may have none
  FIGI     BBG000C05BD1    12 chars, open scheme, share class and
                           venue-level variants both exist
  RIC      RDSA.L          Vendor ticker + venue suffix, changes when a
                           vendor reorganises or the listing moves
  MIC      XLON            The venue itself, ISO 10383

The trap is in the third column. An ISIN identifies the security but not the venue, so one ISIN can span several listings with different currencies, trading hours and settlement locations — which means an ISIN is not a sufficient key for a trade, a position or a market data subscription. A SEDOL is closer to what a trading system needs because it is per market, and that is exactly why firms end up keying on it and then failing on instruments outside its coverage.

Two of these are not stable, and that is the part people design around too late. A RIC is a vendor's ticker and changes when the vendor reorganises coverage or the company changes its listing, so anything persisted with a RIC as the key silently detaches from history. Tickers are worse: they are reused, so the same ticker means different companies at different times. The block above is itself an illustration of the point — those particular codes were retired when the issuer unified its share classes in 2022, so a system that pinned them a few years ago is now holding identifiers that resolve to nothing.

The practical rule is that your internal instrument identifier is your own opaque key, every external scheme is an alias with a validity period attached, and no external identifier is ever a primary key. That single decision is the difference between a reference data system you can extend and one that has to be rebuilt when the firm enters a second market.

Because the mapping is many-to-many, time-varying and contested. One security has several schemes, one scheme has several codes per security across venues and share classes, codes are reissued and retired, and two vendors will disagree about the same mapping on the same day. So the master is not a table of equivalences but a versioned record with sources, precedence rules and effective dates, plus a workflow for a human to resolve conflicts. The failure mode is quiet: a trade booked against the wrong line of stock reconciles against nothing, and the break surfaces days later in a settlement queue rather than as an error at the point of entry.

A two-for-one share split, and what it does to data that was already correct.

Before the split, on 2026-07-24
  Position   1,000 shares          Price 42.00       Market value 42,000
  Price series ... 41.20  41.75  42.00

Split effective 2026-07-27, ratio 2:1

After
  Position   2,000 shares          Price 21.00       Market value 42,000

What breaks if nothing else changes:

  Return series   42.00 -> 21.00 reads as a -50% day. It was a 0% day.
  Moving averages Every window spanning the date is meaningless
  Order in flight A GTC buy limit at 41.50 was near the market; it is now
                  20.50 above it and will fill instantly on the open
  Stop loss       A sell stop at 40.00 is now 19.00 above the market and
                  therefore already breached, so it fires on the open and
                  liquidates a position nobody asked to close
  Reconciliation  Custodian says 2,000, your book says 1,000, until the
                  entitlement is booked

The value is unchanged and every derived number is wrong. That is the whole problem with corporate actions: they are not price moves, they are redefinitions of the unit, so any series compared across the event has to be adjusted rather than read.

The standard answer is to keep two price series — the traded price as it happened, and an adjusted series carrying a cumulative adjustment factor — and to be explicit about which one every consumer reads. Regulatory reporting and trade reconstruction need the unadjusted price, because that is what actually traded. Analytics, backtests and charts need the adjusted one. Systems that keep only one are wrong for half their consumers.

The dates are the second half of the answer, and they are where the real mistakes are. An action has an announcement date, an ex date, a record date and a payment date, and they are not the same day; entitlement follows the record date while the price adjusts on the ex date. Combine that with an unsettled trade straddling the record date and the question of who is entitled becomes a genuine dispute that a claims process exists to resolve.

Voluntary actions are worse than mandatory ones because they need a decision. A tender offer or a rights issue has an election deadline, a default if nobody responds, and a client who must be contacted, so the system owns a workflow with a clock rather than a transformation.

Because almost every date in the domain is a business date in a specific market and currency rather than a calendar date. Settlement date is trade date plus a number of business days for the relevant market, coupon dates roll according to a convention when they fall on a holiday, and a currency leg can settle on a day the security's market is closed. Different venues, depositories and currencies have different holiday sets, so there is no single calendar — there are dozens, joined per instrument and per leg. Systems that compute dates by adding twenty-four-hour increments in one time zone produce wrong settlement dates within a month of going live, and the resulting breaks are tedious to trace.