Key Takeaways
- Nine-character code uniquely identifies North American securities.
- First six characters identify the issuer.
- Ninth character is a check digit for error prevention.
- Essential for accurate trade clearing and settlement.
What is CUSIP Number?
A CUSIP number is a unique nine-character alphanumeric code used to identify North American financial securities for clearing and settlement. It helps investors, traders, and regulators precisely track individual securities like stocks and bonds.
This system, managed by FactSet Research Systems Inc., standardizes security identification to avoid confusion and streamline transaction processing.
Key Characteristics
The CUSIP number is structured to convey issuer and security details clearly and efficiently:
- Issuer Identifier: The first six characters uniquely identify the issuing entity, similar to how a C-corporation is uniquely recognized.
- Issue Details: Characters seven and eight specify the exact security type and issue, such as bonds or stocks.
- Check Digit: The ninth character is a checksum digit that verifies the code's accuracy to prevent errors.
- Standardization: Allows for consistent tracking across multiple platforms and databases including bond ETFs like those listed under best bond ETFs.
How It Works
The CUSIP number functions as a security's barcode, enabling seamless trade clearance and settlement. When you transact with securities such as those from BND, your brokerage uses the CUSIP to identify the exact asset.
Issuers and financial institutions assign CUSIPs through a centralized service, ensuring each security issued by a company or municipal entity has a distinct identifier. This system also integrates with global identifiers for international securities.
Examples and Use Cases
CUSIP numbers are essential in diverse investment scenarios, helping you manage and verify your holdings:
- Corporate Bonds: When investing in bonds issued by companies like Delta, the CUSIP ensures you track the correct issue amid multiple offerings.
- Municipal Securities: City bonds and revenue bonds use CUSIPs to simplify settlement and income payments.
- ETF Investments: Funds tracking indexes such as the EAFE Index rely on CUSIP codes to identify component securities precisely.
Important Considerations
While CUSIPs provide accurate security identification, they are primarily limited to North American issues. For global securities, alternative systems may be necessary. Understanding how CUSIPs interface with tools like discounted cash flow (DCF) models can enhance your investment analysis.
Always verify CUSIP numbers through official sources or your brokerage to avoid transaction errors, especially when dealing with complex securities or lesser-known issuers.
Final Words
CUSIP numbers uniquely identify financial securities, ensuring precise tracking and settlement in the market. To verify or research a specific security, check official databases like EMMA or consult your broker for the exact CUSIP code.
Frequently Asked Questions
A CUSIP number is a nine-character alphanumeric code that uniquely identifies a North American financial security. It helps traders, investors, and regulators track and identify specific securities for clearing and settlement.
A CUSIP number consists of three parts: the first six characters identify the issuer, the seventh and eighth characters specify the exact security type and issue, and the ninth character is a check digit used to verify accuracy.
CUSIP numbers prevent confusion by clearly identifying securities, enable accurate transaction management, support trade clearance and settlement, and help investors and analysts identify specific financial instruments.
For U.S. government and municipal securities, you can find CUSIPs on the MSRB's EMMA website. For corporate securities, check your brokerage account, the issuer’s investor relations site, or financial data providers.
The CUSIP system is owned by the American Bankers Association and operated by CUSIP Global Services, which is managed by FactSet Research Systems Inc.
CINS is an extension of the CUSIP system created in 1989 to cover global securities. It adds a country identifier letter at the start for non-North American securities.
Yes, the ninth character in a CUSIP number is a check digit that acts as a checksum to verify the code’s accuracy and help prevent errors during data entry.
