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Glossary

ISIN

Category — Issue Parameters
The ISIN Code (acronym for International Securities Identification Number) is an international code that uniquely identifies financial instruments. It allows the identification and differentiation of multiple securities such as bonds, shares (including unlisted ones), futures, warrants, trusts, options and credit rights. Although they are not securities, stock indices also have an ISIN code. It consists of 12 alphanumeric characters that allow the standardization and immediate identification of the many types of securities. The structure and rules for its assignment are determined by ISO (International Organization for Standardization) in the ISO 6166 standard. These standard dates back to 2001 and is characterized as follows:

The first 2 characters identify the geographical origin of the security, or the so-called Country of Quotation. However, these characters identify the issuer’s country of origin and not that of the underlying issue. These characters must comply with the ISO 3166-1 standard used to indicate places. In fact, for example, IT will correspond to Italy, DE to Germany, US to the United States, FR to France and so on. However, the Eurobonds registered by Euroclear and Clearstream have the letters XS as a prefix: these two characters are precisely the internationally accepted convention for quickly identifying Eurobonds. Example of a Eurobond. Although the issuer (in this case BMW) is a German company, the code appears to be XS.

The next 9 characters, or from the third to the eleventh character, are called NSIN. The NSIN is assigned by each country’s National Numbering Agency (NNA). In Germany, for example, the assigning company is WM Datenservice and the NSIN is Wertpapierkennnummer; in the United Kingdom, the assigning company is the London Stock Exchange and the NSIN is SEDOL; in Italy the assigning agency is the Bank of Italy; in France Euronext and in North America CUSIP is used as NSIN. Furthermore, the CUSIP code is almost a mirror image of the ISIN code itself. In fact, its very structure is based on CUSIP codes. For example: that issue; here it can be seen that the ISIN code of the aforementioned Eurobond is US90131HAR66, and its CUSIP code is 90131HAR6. That is, the CUSIP code corresponds to the NSIN characters of the ISIN code, therefore it can be said that the ISIN code is based on the structure of a CUSIP with the addition in principle of the two characters indicating the geographical origin of the issuer and the last character as described below.

Finally, the last character, or the twelfth, is a Check Digit. This number is a form of redundancy check used for error detection. It is calculated according to the previous 11 characters and performs two functions: it prevents the risk of counterfeit numbers and confirms the authenticity of the code itself. Generally, the Check Digit is designed to cope with any typing errors of human operators. In addition, it allows you to detect simple and typical errors in entering a series of digits such as a single incorrectly typed digit or a number repeated several times. On the other hand, it does not allow the detection of more complex errors.

In any case, the ISO has now delegated the management and maintenance of the 6166 standard to ANNA (Association of National Numbering Agencies), an international association of financial entities and institutions that carry out the activity of coding agencies locally.

Use and purposes of ISIN codes

The attribution of the ISIN code has a simple identification purpose: the actual existence, legitimacy and validity of the instrument are not the responsibility of the NNA. Likewise, any information regarding the financial solidity of the issuer and the financial coverage of the security itself remains outside the ISIN coding system. Its purpose is to ensure a consistent and comparable format to all securities and financial instruments in circulation, allowing their unequivocal and immediate identification and the possibility for institutional investors to monitor these securities in a consistent manner throughout the world.

Due to its aforementioned characteristics of uniqueness, an ISIN code cannot be assigned to multiple securities, although securities may have similar or even almost mirror-like characteristics, in the event that they are two separate securities the ISIN code will be different for both.

An ISIN code should not be confused with the Ticker symbol which instead serves to identify the stock at stock exchange level. A company’s stocks may have multiple ticker symbols depending on the different trading platforms, but the stocks will always have only one ISIN.

Furthermore, the ISIN code, since it is a unique and universal code, represents the fastest and safest way to have all the necessary information on a security and it is now possible to search for a financial instrument through its ISIN code on any trading platform. trading, international stock exchange and specialized site. ISIN codes were used for the first time in 1981 without getting a lot of feedback from investors. Only later, starting from 1989, did they obtain an increasingly considerable acceptance from the market and from the personalities of the sector. In fact, in 1989, the countries belonging to the G30 began recommending its adoption. It was therefore approved, in 1990, by ISO with the standard still used today. From then on it acquired more and more importance until it reached the current relevance.

In the past, in fact, the ISIN code was used only as a secondary tool for identifying securities, but today it is used as a primary code throughout Europe, the United States and Canada as its structure is based on CUSIP codes. Over time, more and more countries are starting to adopt it as a standard for classifying their titles in circulation and this is critical to achieving global straight-trough processing (STP). STP is the digital management of clearing and settlement activities without manual intervention. Not only that: some European regulations, including the most important is Solvency II, impose and increasingly require the use of this code in order to identify and standardize all the securities on the market.

Furthermore, in 2004, the European Union included the ISIN code among the authorized identification tools, making it, in practice, a mandatory part of regulatory reports.
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