A 12-digit alphanumeric code, an International Securities Identification Number (ISIN), serves the purpose of recognising a specific security. Each country has its own National Numbering Agency (NNA), an organisation responsible for the distribution of ISINs. In this article, we will take a look at ISIN and understand its features and importance in detail.
History of the International Securities Identification Number (ISIN)
The ISIN system was established back in 1981. However, it was extensively implemented only in 1989 after the G30 (Group of 30) nations urged all its members to adopt this numbering system to differentiate between various investment instruments. After a year, the International Organisation for Standardisation (ISO) became a part of the Group and started using the ISO 6166 standard as its point of reference.
While the NNAs are in charge of assigning and managing the records of the ISINs for securities in their respective economies, ISO is tasked with maintaining consistency in the format and structure of these security codes across diverse markets.
Before 2000, the ISIN code data was allocated using disks. Later, the distribution was transmitted via the Internet. In 2004, this numbering system became even more significant when the European Union (EU) enforced its mandatory use for key regulatory reporting requirements.
At the moment, an ISIN can be allotted to most securities, including equity stock, derivatives, commodities, currencies, depositary receipts, rights and warrants, debt instruments, commercial paper, and T-bills.
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Assigning an International Securities Identification Number (ISIN)
The procedure for assigning an ISIN code entails the following steps:
- Application: The authorised representative or issuer has to apply to the National Numbering Agency (NNA) in their country for the ISIN code with relevant details about the concerned security.
- Verification: The NNA then corroborates the details mentioned in the application. If it finds the submitted information to be unsatisfactory, the NNA may request additional data to complete the verification.
- Allotment: After the successful verification of a security, the NNA will allocate an ISIN code to the security that meets all the prescribed requirements.
- Registration: The NNA will enrol the assigned ISIN code with the ISO. This is done to make sure that ISIN complies with global standards and is acknowledged worldwide.
Significance of an International Securities Identification Number (ISIN)
Once allotted, this ISIN remains associated with the security until the end of its lifespan, regardless of where it is traded globally. Such uniformity guarantees accuracy while tracking and settling transactions. Likewise, it upholds tenets of productiveness and integrity in the global financial ecosystem.
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Characteristics of the International Securities Identification Number (ISIN)
All people trading securities internationally are required to utilise the ISIN system. It can be viewed as a de facto standard in security trading. With the exception of the United States of America and Canada, which adhere to the CUSIP numbering system, all other countries follow the ISIN system.
Let us now explore the essential traits of the ISIN number.
Twelve-character numbering system: The ISIN code is a 12-digit alphanumeric code, which can be dissected in the following manner.
- The first two letters of the code denote the country in which the issuing organisation that we know to be the NNA is located.
- The succeeding nine numbers trace a particular security, qualifying to be a distinctive identifier.
- The last digit, also known as the “check digit”, is used to uncover any incidents of forgery.
Computer-generated code: An ISIN code is crucial in thwarting any attempts of counterfeiting. These computer-generated nine numbers signifying security-specific codes are derived from a complex mathematical equation.
Aegis of the International Organisation for Standardisation (ISO): Currently, ISO defines the structure of ISIN. The present law states that an ISIN can be used for most types of securities, such as equity shares, bonds, derivatives, commodities, and currencies.
International Securities Identification Number (ISIN) in India
In Indian capital markets, the duty of assigning ISIN has been given to the National Securities Depository Limited (NSDL) by the Securities and Exchange Board of India (SEBI). In the case of government-based securities, the allocation of the ISIN codes is managed by the Reserve Bank of India. If you wish to learn more about a specific ISIN code, you can explore the directory available on the official NSDL website.
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Closing thoughts
An International Securities Identification Number (ISIN) is a unique 12-character code that is issued to all securities in the world. This numbering system is imperative as it streamlines the trading, clearance, and settlement of security transactions that are global in nature. Furthermore, it enhances the regulators’ ability to supervise trading activities and spot any possible fraud and market manipulation. To gain more information about ISIN issued to Indian securities, you can visit the NSDL website to access the ISIN master directory.
