What is a CUSIP Number?

A CUSIP number is a unique, 9 character identifier of all registered stocks, bonds (including government and municipal issues), derivatives, and syndicated loan within the United States and Canada.  It was put in place to make the clearing and settlement of securities more efficient and to reduce the administrative expenses involved with managing this process.

The acronym CUSIP stands for the Committee of Uniform Securities Indentification Procedures.  The CUSIP database is owned by the ABA (American Bankers Association) and is operated by the S&P.

How is the CUSIP Derived?

Out of the 9 total characters, the first 6 uniquely identify the issuer and are provided to each issuer in alphabetical order.  These first 6 characters are referred to as the "base" characters.  In some instances, 6 digits will not be enough to identify all of the different issues that an entity has.  Therefore, a 7th digit may be needed here.  This is common with government issued debt.

You may wonder how new issuers are issued a CUSIP alphabetically.  The CUSIP number system has taken into account the fact that there will be new issuers every year.  Therefore, they have placed gaps within the numbering system to allow for future additions.

The next two digits identify the exact issue of the security and the character convention will be different between security types.  These two digits are commonly referred to as the "issue number".  These two characters will be numeric when applied to stocks; however, fixed income securities will have one numeric and one letter.  The letter will reference the maturity month while the number will reference the maturity year.

The final digit is known as the check digit and this number is appended to validate the accuracy of the number being transmitted.  The check digit is derived through a mathematical technique known as the Modulus 10 Double Add Double technique.  Without getting into the guts of this calculation, you should know that this number allows a financial institution to verify that the first 8 digits were transmitted correctly.
Tim Ord
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