Properly known as the Committee on Uniform Security Identification Procedures, CUSIP sets the standards for the alphanumeric security identification number that appears on all securities that are issued in North America. Referred to as the CUSIP number, the series is a nine-character combination of numbers and letters that is used for facilitating the process of clearing a trade, as well as settling trades.
The creation and formation of CUSIP numbers is a process that is owned by the American Bankers Association. Standard & Poor’s handle administration of the CUSIP numbers. Under the direction of these two organizations, the CUSIP Services Bureau handles the process of numbering securities that are assigned to products that are produced in the United States and Canada.
Each of the sections of the CUSIP have specific meanings. The first six characters of the CUSIP are referred to as the base of the number, and are used to identify a specific issuer. Any characters used in the seventh and eighth positions have to do with the nature of the security that is being issued. The characters in these positions may be numbers if the security has to do with equity, while letters are used to designate fixed income.
Ending the series in the ninth position is what is known as the check digit. This digit is determined by taking the second character in the CUSIP and multiplying it by two. In the event that the second character is a letter, the value is determined by figuring the ordinal position of the letter in the alphabet to 9. In the event of multiple digits being the sum of the multiplication, the digits are added until a single digit sum is arrived.
During the latter part of the 20th century, an attempt was made to expand the utilization of CUSIP to a worldwide level. Dubbing the process as the CUSIP International Numbering System or CINS, the concept has never really achieved the support that was originally envisioned. Much of this is due to the launch of a competing system along the same time, known as the ISIN. With a less complicated approach to assigning the identification numbers, the ISIN quickly gained more acceptance. However, CINS does continue to appear in the ISIDPlus directory, which is a comprehensive work containing a wide range of information on international securities.
