Definition
A CUSIP number is a unique nine-digit alphanumeric code that identifies a North American financial security for the purpose of facilitating trades and settlements. The acronym “CUSIP” stands for Committee on Uniform Security Identification Procedures. This system is used in the record keeping and administration of securities and is mainly used in the United States and Canada.
Key Takeaways
- The CUSIP Number is a unique identifier for securities, specifically in the U.S. and Canada. It is used to track and clear the security’s trading activity.
- The term “CUSIP” stands for Committee on Uniform Securities Identification Procedures. The CUSIP system is owned by the American Bankers Association and is operated by S&P Global.
- A CUSIP number consists of nine characters, with the first six digits representing the issuer, the next two digits representing the security type, and the last digit serving as a check digit.
Importance
The finance term CUSIP Number is crucial as it provides a unique identification for securities, including stocks of all registered U.S. and Canadian companies, and U.S.
government and municipal bonds. The CUSIP (Committee on Uniform Securities Identification Procedures) system facilitates the clearing and settlement process of securities and aids in reducing the potential for confusion and error during transactions.
This numerical system makes it easier to track, trade, and manage these securities across numerous platforms and exchanges. Furthermore, it standardizes and simplifies securities reporting, making financial record-keeping and administration much more accurate and efficient.
Explanation
The CUSIP Number serves a significant role in the finance industry, especially concerning the efficiency and accuracy of securities transactions. This nine-character alphanumeric code represents a unique identifier for all North American stocks and U.S.
government and municipal bonds. It was introduced to improve the clearing and settlement process of security trades, as well as provide a distinct structure to help in maintaining a precise record of all trades including the accurate reporting of security transactions to issuers.
The CUSIP system, administered by CUSIP Global Services, offers a vital aid in decreasing failed trade rates. It aids greatly in the internal control of trades, the reduction of potential trade errors, and the lowering of operational and administrative costs.
Its utilization extends across various stages of trading, from pre-trade inquiry to post-trade clearance and settlement. Additionally, investors and financial institutions use CUSIP numbers for record-keeping purposes; they enable easy referencing and tracking of the securities within their portfolios.
Examples of CUSIP Number
Bonds and Stocks: As a key identifier, the CUSIP number is vital in trading securities. For example, International Business Machines Corp. (IBM) is a multinational technology company that issues both stocks and bonds. Each of these different types of securities will have their own unique CUSIP number. Let’s say IBM’s 10-year bond has the CUSIP number 459200AB7 to specifically identify it in all accordance of trades, clearance, and settlements.
Mutual Funds: A CUSIP number is also used in mutual fund transactions. For instance, the Vanguard 500 Index Fund, one of the largest mutual funds, has a CUSIP number of
The unique identifier is critical in tracking and substantiating the buy and sell decisions with this fund.
Exchange Traded Funds (ETF): Similar to stocks and mutual funds, ETFs also hold CUSIP numbers. For example, the SPDR S&P 500 ETF, a popular ETF that tracks the S&P 500 Index, has a CUSIP number of 78462F
This 9-character code uniquely identifies this specific ETF for investors and brokers during transactions.
FAQs about CUSIP Number
What is a CUSIP Number?
A CUSIP number is a nine-character alphanumeric code that identifies a North American financial security. It is used for the clearance and settlement process of buying or selling securities, and for other financial operations.
Who assigns a CUSIP Number?
The CUSIP numbers are assigned by the CUSIP Global Services (CGS). CGS is managed on behalf of the American Bankers Association by S&P Global Market Intelligence.
Does every security have a CUSIP Number?
Not all securities have a CUSIP number. Generally, securities that trade on U.S. and Canadian exchanges will have a CUSIP number. Securities that are privately traded or deal outside North America usually don’t have a CUSIP number.
How can I find a CUSIP Number?
You can find a CUSIP number through various sources like the Investor’s broker, the Municipal Securities Rulemaking Board (MSRB) for municipal securities, or the company’s financial reports.
Is CUSIP Number same as ISIN?
No, CUSIP Number is not the same as ISIN. The CUSIP Number is mainly used in the U.S. and Canada, while the ISIN is an international standard used around the world for identifying securities.
Related Entrepreneurship Terms
- Securities Identification
- Clearing House
- Bond Number
- Issuer Identification
- Asset Management
Sources for More Information
- Investopedia: It offers thorough explanations and real-world examples for a broad range of finance terms including CUSIP Number.
- CUSIP Global Services: This is the official source for CUSIP-related information. It provides a comprehensive range of unique identifiers and descriptive data.
- U.S. Securities and Exchange Commission (SEC): This government site has official documentation and resources on finance-related topics, including CUSIP Number.
- Securities Industry and Financial Markets Association (SIFMA): This is a professional organization that provides resources on a variety of finance topics, including issues related to CUSIP Numbers.
