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CUSIP Number

Definition

The CUSIP Number is a unique alphanumeric identification code assigned to stocks and registered bonds in the United States and Canada. It facilitates efficient trading, settlement, and clearing processes. It is managed by the Committee on Uniform Securities Identification Procedures.

Phonetic

The phonetics of the keyword “CUSIP Number” would be: Kew-sip Num-bur

Key Takeaways

  1. Unique Identifier: A CUSIP (Committee on Uniform Securities Identification Procedures) number is a unique, nine-character alphanumeric code that identifies a North American financial security for the purpose of facilitating clearing and settlement of trades.
  2. Use in Different Securities: CUSIP numbers are used in order to track and identify a wide range of securities, including stocks of all registered U.S. and Canadian companies, and U.S. government and municipal bonds.
  3. Creation and Maintenance: The CUSIP system is owned by the American Bankers Association and is operated and managed by S&P Global Market Intelligence, which creates new CUSIP numbers and updates the CUSIP Master File.

Importance

A CUSIP number is crucial in the business/finance field as it facilitates the clear and precise international identification of securities and their issuers. It is a nine-character alphanumeric code that assigns a unique identifier to every stock and registered bond in the United States and Canada, making the trade and settlement processes more efficient and error-free. Without a CUSIP number, tracking, buying, selling, and trading these securities would be more complex and prone to errors. Therefore, this system offers an essential level of clarity and efficiency in the financial market transactions.

Explanation

The CUSIP number serves a significant role in the finance and business industry, primarily to facilitate the clearance and settlement process of securities. CUSIP stands for Committee on Uniform Security Identification Procedures, and it’s a unique nine-digit alphanumeric code that is assigned to all stocks, bonds, options and other securities in the U.S. and Canada. This system helps in uniquely identifying financial instruments across institutions and exchanges, reducing the potential for confusion or error. This is crucial as it ensures accurate and efficient trade and transaction processing.

Moreover, the CUSIP number aids various parties involved in security transactions, including brokers, traders, custodians, and researchers. For example, traders use it to expedite and ensure accuracy in buying, selling, and tracking securities. On the other hand, researchers and financial analysts employ it to consolidate information about a specific security from different data sources, making it easier to generate comprehensive analyses. Fundamentally, the standardization afforded by the CUSIP system promotes transparency, accuracy, and efficiency in the financial market.

Examples

1. Apple Inc. Bonds: If you are an investor wanting to buy bonds of Apple Inc., you would need the CUSIP Number to identify the exact security. For instance, a specific issue of Apple Inc. bonds may have a CUSIP Number like 037833AJ3. This 9-digit alphanumeric code especially assigned to this particular bond issue would help investors, brokers and traders to accurately identify, buy, sell or trade this financial instrument.

2. Microsoft Corp. Stocks: Suppose you are a stockbroker tracking trades of Microsoft Corporation’s common stock. To accurately record and report these trades, you would use the CUSIP Number 594918104 , this is specific to Microsoft’s common stock. Each time a trade is made, this number ensures that the correct security is being bought or sold, mitigating the risk of potential human error.

3. Vanguard 500 Index Fund: If you are a financial advisor and your client wants to purchase units in the Vanguard 500 Index Fund, you would use the CUSIP Number 922908413 to ensure your client’s investment is directed correctly. A CUSIP number will enable you to handle transactions related to this fund with precision and accuracy, reducing the risk of any misplacement of investments.

Frequently Asked Questions(FAQ)

What is a CUSIP Number?

A CUSIP number is a unique nine-character alphanumeric code that identifies a North American financial security for the purposes of facilitating clearing and settlement of trades.

What does CUSIP stand for?

CUSIP stands for Committee on Uniform Securities Identification Procedures. This committee established a system to uniquely identify securities in the US and Canada.

Who issues CUSIP numbers?

CUSIP numbers are issued by an organization called CUSIP Global Services, which is managed on behalf of the American Bankers Association by Standard & Poor’s.

Who uses CUSIP numbers?

CUSIP numbers are used by the securities industry and by government regulators to track trading and ownership of securities. They are also used in transaction processing.

Are CUSIP numbers public?

Yes, CUSIP numbers are publicly available and can be obtained through financial publications and investment professionals.

Can a security have more than one CUSIP number?

Generally, each distinct issuance of a security has its own unique CUSIP. However, if a security is reissued, it may be assigned a new CUSIP.

How is a CUSIP number structured?

The structure of a CUSIP is composed of nine characters. The first six characters are the issuer symbol, the next two identify the exact issue, and the ninth digit is a check digit.

Do all financial products have a CUSIP number?

Almost all financial products are assigned a CUSIP number. This includes stocks, bonds, notes, government securities, syndicated loans, and other investment instruments. However, some derivative products may not have a CUSIP number.

Does a CUSIP number change if the company’s name changes?

No, a CUSIP number remains the same even if the company’s name changes. The CUSIP is linked to the security itself, not to the company’s name.

Related Finance Terms

  • Security Identifier
  • ISIN (International Securities Identification Number)
  • Bond Identification Number
  • Serial Number
  • Financial Instrument Code

Sources for More Information

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