International Securities Identification Number

An International Securities Identification Number (ISIN) uniquely identifies a security. Its structure is defined in ISO 6166. Securities for which ISINs are issued include bonds, commercial paper, stocks and warrants. The ISIN code is a 12-character alpha-numerical code that does not contain information characterizing financial instruments but serves for uniform identification of a security through normalization of the assigned National Number, where one exists, at trading and settlement.

Securities to which ISINs can be issued include debt securities, shares, options, derivatives and futures. ISIN cannot specify a particular trading location in this case, and another identifier, typically MIC (Market Identification Code) or the three-letter exchange code, will have to be specified in addition to the ISIN. The Currency of the trade will also be required to uniquely identify the instrument using this method.

Description

ISO 6166 (or ISO6166:2013 as of the 2013 revision) defines the structure of an [International Securities Identifying Number (ISIN). An ISIN uniquely identifies a fungible security. Securities with which ISINs can be used are equities, debts, ETFs, options, derivatives, and futures.

ISINs consist of two alphabetic characters, which are the ISO 3166-1 alpha-2 code for the issuing country, nine alpha-numeric characters (the National Securities Identifying Number, or NSIN, which identifies the security), and one numerical check digit. They are 12 characters in length.

Usage and Acceptance

ISINs have been slowly gaining traction worldwide in their usage.

The NSIN element of the ISIN can be up to 9 digits long. Shorter numbers are padded with leading zeros before the addition of the country code and a check digit transform the NSIN to an ISIN.

ISINs are being introduced worldwide. Trading, clearing and settlement systems in many countries have adopted ISINs as a secondary measure of identifying securities. Some countries, mainly in Europe, have moved to using the ISIN as their primary means of identifying securities. In addition new European regulations such as Solvency II increasingly require the ISIN to be reported.[1]

Commercial Model

The ISIN is generally included in services sold by financial data vendors. These services are normally paid services as more, value add data is included with the information. In general, the issuer of a security may include the ISIN in issuance papers or other documentation for identification purposes.

Controversy

In 2009, Standard & Poor's was formally charged by the European Commission (EC) with abusing its position in licensing international securities identification codes for United States of America securities by requiring European financial firms and data vendors to pay licensing fees for their use. "This behaviour amounts to unfair pricing," the EC said in its statement of objections which lays the groundwork for an adverse finding against S&P. "The (numbers) are indispensable for a number of operations that financial institutions carry out – for instance, reporting to authorities or clearing and settlement – and cannot be substituted.”[2][3]

In 2011, Standard and Poor's provided six undertakings to the European Commission to remedy the situation. The agreement is applicable to all consuming companies in the European Economic Area. These expire at the end of 2016.

Examples

The examples below describes one approach for applying the Luhn algorithm on two different ISINs. The difference in the two examples has to do with if there are an odd or even number of digits after converting letters to number. Since the NSIN element can be any alpha numeric sequence (9 characters), an odd number of letters will result in a an even number of digits and an even number of letters will result in an odd number of digits. For an odd number of digits, the approach in the first example is used. For an even number of digits, the approach in the second example is used. The Luhn algorithm can also be applied in the same manner for both types or lengths (alternating multiply the string of digits by 1 and 2, staring from the end of the string), being more generic.

Apple Inc.

Apple Inc.: ISIN US0378331005, expanded from CUSIP 037833100 The main body of the ISIN is the original CUSIP, assigned in the 1970s. The country code "US" has been added on the front, and an additional check digit at the end. The country code indicates the country of issue. The check digit is calculated using the Luhn algorithm.

Convert any letters to numbers:

U = 30, S = 28. US037833100 -> 3028037833100

Collect odd and even characters:

3028037833100 = (3, 2, 0, 7, 3, 1, 0), (0, 8, 3, 8, 3, 0)

Multiply the group containing the rightmost character (which is the FIRST group) by 2:

(6, 4, 0, 14, 6, 2, 0)

Add up the individual digits:

(6 + 4 + 0 + (1 + 4) + 6 + 2 + 0) + (0 + 8 + 3 + 8 + 3 + 0) = 45

Take the 10s modulus of the sum:

45 mod 10 = 5

Subtract from 10:

10 - 5 = 5

Take the 10s modulus of the result (this final step is important in the instance where the modulus of the sum is 0, as the resulting check digit would be 10).

5 mod 10 = 5

So the ISIN check digit is five.

Treasury Corporation of Victoria

TREASURY CORP VICTORIA 5 3/4% 2005-2016: ISIN AU0000XVGZA3. The check digit is calculated using the Luhn algorithm.

Convert any letters to numbers:

A = 10, G = 16, U = 30, V = 31, X = 33, Z = 35. AU0000XVGZA -> 103000003331163510.

Collect odd and even characters:

103000003331163510 = (1, 3, 0, 0, 3, 3, 1, 3, 1), (0, 0, 0, 0, 3, 1, 6, 5, 0)

Multiply the group containing the rightmost character (which is the SECOND group) by 2:

(0, 0, 0, 0, 6, 2, 12, 10, 0)

Add up the individual digits:

(1 + 3 + 0 + 0 + 3 + 3 + 1 + 3 + 1) + (0 + 0 + 0 + 0 + 6 + 2 + (1 + 2) + (1 + 0) + 0) = 27

Take the 10s modulus of the sum:

27 mod 10 = 7

Subtract from 10:

10 - 7 = 3

Take the 10s modulus of the result (this final step is important in the instance where the modulus of the sum is 0, as the resulting check digit would be 10).

3 mod 10 = 3

So the ISIN check digit is three.

Check-digit flaw in ISIN

The Treasury Corporation of Victoria ISIN illustrates a flaw in ISIN's check digit algorithm which allows transposed letters: Suppose the ISIN was mis-typed as AU0000VXGZA3

A = 10, G = 16, U = 30, V = 31, X = 33, Z = 35. AU0000VXGZA -> 103000003133163510.

Collect odd and even characters:

103000003133163510 = (1, 3, 0, 0, 3, 3, 1, 3, 1), (0, 0, 0, 0, 1, 3, 6, 5, 0)

Multiply the group containing the rightmost character (which is the SECOND group) by 2:

(0, 0, 0, 0, 2, 6, 12, 10, 0)

Add up the individual digits:

(1 + 3 + 0 + 0 + 3 + 3 + 1 + 3 + 1) + (0 + 0 + 0 + 0 + 2 + 6 + (1 + 2) + (1 + 0) + 0) = 27

Take the 10s modulus of the sum:

27 mod 10 = 7

Subtract from 10:

10 - 7 = 3

Take the 10s modulus of the result (this final step is important in the instance where the modulus of the sum is 0, as the resulting check digit would be 10).

3 mod 10 = 3

So the ISIN check digit is still three even though two letters have been transposed.

BAE Systems

BAE Systems: ISIN GB0002634946, expanded from SEDOL 000263494

The main body is the SEDOL, padded on the front with the addition of two zeros. The country code "GB" is then added on the front, and the check digit on the end as in the example above.

See also

References

  1. ↑ https://dev.eiopa.europa.eu/Taxonomy/Full/2.0.1/EIOPA_XBRL_Filing_Rules_for_Solvency_II_reporting_2.0.1.pdf
  2. ↑ Securities Technology Monitor, ed. (2009). "EC Charges S&P With Monopoly Abuse".
  3. ↑ Finextra, ed. (2009). "European Commission Accuses S&P of Monopoly Abuse over Isin Fees".

External links

This article is issued from Wikipedia - version of the 11/29/2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.