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What are Cusip Numbers and How Do They Matter

26 Sep 2023

Introduction

CUSIP, which stands for Committee on Uniform Securities Identification Procedures, is a nine-character alphanumeric code used primarily in the United States and Canada to identify financial securities. It was introduced in 1964, and since then, it has become an integral part of the financial industry.

CUSIP numbers are assigned to stocks, bonds, mutual funds, and other investment products. They provide a standardized way to identify these securities, making it easier to process trades, track ownership, and manage portfolios.

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CUSIP numbers not only help financial professionals but also assist regulators, investors, and analysts in conducting research, monitoring market activity, and ensuring compliance with securities regulations.

The CUSIP system is administered by CUSIP Global Services (CGS), and over the years, it has expanded its reach beyond North America to cover securities in other parts of the world.

The CUSIP number comprises three components:

  1. The initial six characters correspond to the security's issuer or company. These characters, known as CUSIP-6, are distinct for each issuer and are derived from the issuer's name.
  2. The seventh and eighth characters indicate the security type.
  3. The ninth character serves as a checksum digit, automatically generated to ensure the accuracy of the CUSIP number

For instance, CUSIP Number: 037833100 of Apple Inc's stock,

The first six characters (037833) typically represent the issuer or company.

The seventh and eighth characters (10) denote the security type.

The ninth character (0) is a check digit used for validation.

Relevance in Indian Financial Markets

In India, the equivalent of CUSIP numbers for identifying securities is the International Securities Identification Number (ISIN). ISIN is a global standard developed by the International Organization for Standardisation (ISO) to identify securities. It is used in many countries, including India, to facilitate the trading and settlement of securities.

ISINs are issued by the National Securities Depository Limited (NSDL) and the Central Depository Services (India) Limited (CDSL) in India. They are used for various purposes in the Indian financial markets, such as trading, settlement, and reporting.

So, while CUSIP numbers are not directly relevant in India, ISINs serve a similar purpose and are the standard for identifying securities in the Indian financial system.

Difference Between CUSIP and ISIN

ISIN and CUSIP are both alphanumeric codes used to identify financial securities, but they have key differences. ISINs are used globally and follow an ISO standard, providing a standardized identification system for securities worldwide. CUSIPs, on the other hand, are primarily used in the United States and Canada. While ISINs consist of 12 characters, typically made up of letters and numbers, CUSIPs have 9 characters, often containing letters and numbers as well as hyphens. ISINs are administered by national numbering agencies, while CUSIPs are managed by CUSIP Global Services.

 

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