CUSIP 101: Back to Basics April 26th, 2017 CUSIP Committee on Uniform Security Identification Procedures. CUSIP is a registered trademark of the American Bankers Association. CUSIP Global Services is managed on behalf of the American Bankers Association by S&P Global Market Intelligence. 1 Back to Basics: Agenda History of CUSIP CUSIP Global Services Today A World of Standards Processes and Procedures Protecting the Data Data Distribution A Glimpse of the Future 2 History of CUSIP: Lets Go Back to 1964 First class stamp: 5c Average New Car: $3,500 Hot New Toy
3 History of CUSIP: A Timely Origin DJIA Year-End Close: 874 Federal Spending: $118.53B Federal Debt: $316.1B With increased trading volume, manual transfer of physical stock certificates overwhelms the system NYSE begins to close every Wednesday; early on other days for back offices to catch up Outdated procedures lead tomodernization 4 History of CUSIP: Order From Chaos NYCHA tasks ABA with creating a system to Uniquely identify each current and future security Be imprinted on all new certificates in a uniform position Be machine-readable to facilitate electronic processing CUSIP Identifier 5
History of CUSIP Recognition of CUSIPs value The CUSIP system represents the foundation of the program to improve the speed and accuracy in the processing of securities and the transactions involving them. We urge you to build upon that foundation as quickly as possible and again congratulate all of the organizations and individuals who participatedfor their noteworthy achievement. - SEC Chairman Hamer Budge, 1969 To the extent that CUSIP was written into any rules and regulations over the years, it was a recognition of its success not a cause of its success 6 History of CUSIP: Meeting the Markets Needs 7 History of CUSIP: Meeting the Markets Needs 8
CUSIP Global Services Today Powering Efficient Capital Markets CUSIPs help foster market liquidity Over 30mm securities and their issuers worldwide Reputation as trusted originator of quality identifiers and descriptive data Interoperable among regulators, banks, vendors, exchanges, and depositories Numbering system or agency for United States and Canada Cayman Islands, Bermuda, and British Virgin Islands 35 Other markets throughout Caribbean and Central/South America 9 CUSIP Global Services Today Independent, Focused Standards Practitioner Operated by the Market Intelligence division of S&P Global on behalf of the American Bankers Association S&Ps dedication: original CSB operated at a loss for years External ABA ownership respected (Firewalled business) Dedicated Relationship Management Team
CUSIP Board of Trustees Industry-appointed, with dedicated SIFMA, DTCC and ABA seats Advisory capacity to guide growth and enhancements Ensures responsiveness to evolving needs of the markets 10 CUSIP Global Services Today Sustained Reinvestment on Behalf of the Industry New asset classes/market sectors that suffer for lack of a standard: Listed options (collaboration with Euromoney TRADEDATA) MAC Swaps (collaboration with SIFMA) Syndicated Loans (collaboration with LSTA) Physical precious metals (collaboration with Delaware Depository) Enhanced coverage of related standards Financial Instrument Short Name (FISN) Classification of Financial Instruments (CFI) Connection to DTCCs GMEI Utility for LEI Registration Allows one-stop shopping for securities identifiers and LEIs Over 9,000 Issuer and Fund LEIs registered to date 11
CUSIP Global Services Today Asset Class Coverage Equity Debt Other Common/Ordinary Shares Corporate Credit Derivatives (RED codes) Preferred Shares Municipal Market Agreed Coupon (MAC) ADRs and GDRs US Treasury and Agencies
Exchange Traded Funds Sovereign Indices Supranational Agencies Limited Partnerships Bankers Acceptances Physical Precious Metals Listed Options US/Canada Commercial Paper Restricted 144A and Reg S Mutual Funds Medium Term Notes
REITs Certificates of Deposit Structured and Hybrid Products Rights Mortgage-backed Securities Variable Annuities Warrants Asset-backed Securities Other Insurance-Related Unit Investment Trusts CLOs / CDOs Swaps
Hedge Funds and Funds of Funds Securities Products Syndicated Bank Loans 12 A World of Standards: ANNA 13 ANNA: At a Glance CGS one of 22 Founding Members in 1992 Currently 82 full members and 30 partners representing 122 countries Responsible for ISIN allocation and distribution www.anna-web.org Main website for the ANNA organization www.annaservice.com Hub of Global ISIN data (CGS and SIX Financial) 14
A World of Standards: ISIN ISO 6166 - International Securities Identification Number A global, uniform unique code that identifies instruments to facilitate cross-border trading Example: Amazon.com Inc. Common Stock Country Code 2 char Local ID 9 char Check 1 digit ISIN Identifier US 023135106 7 US0231351067
Local ID is assigned by the responsible NNA CUSIP will be Local ID for US and Canadian ISINs ISO Rules govern the Country Code: - Equity: country where the entity is incorporated or organized - Debt: location of the Central Securities Depository 15 A World of Standards: FISN ISO 18774 Financial Instrument Short Name Provides a consistent and uniform approach to standardize short names and descriptions for financial instruments Example: Carbonite Inc. debt Issuer Name Max 15 char CARBONITE INC / Instrument Description Max 19 char 2.5NT20220401SRCONV FISN
CARBONITE INC/2.5NT20220401SRCONV Segments of the Instrument Description: - Interest rate/type (2.5) Abbreviated security type (Notes) Maturity date (April 1, 2022) Rank (Senior) Other attribute (Convertible) 16 A World of Standards: CFI ISO 10962 Classification of Financial Instruments code Equity/Shares CFI Code Debt/ Bonds ESVUFR CFI Code DBFUGR
Asset / Product Type Asset / Product Type Category E = Equity Category D = Debt Group S = Shares Group B = Bonds Attributes Attributes 1st Attribute Voting right
V = Voting 1st Attribute Type of Interest F = Fixed Rate 2nd Attribute Ownership U = Unrestricted 2nd Attribute Guarantee U = Unsecured 3rd Attribute Payment Status F = Fully Paid 3rd Attribute Redemption G = Callable 4th Attribute Form
R = Registered 4th Attribute Form R = Registered 17 A World of Standards: LEIs ISO 17442 Legal Entity Identifier Designed to uniquely and unambiguously identify participants in financial transactions Example: Philadelphia Cheesesteak Company LOU prefix 4 char Entity Identifier 14 char Verification ID 2 digits 5493
00SAMIRN1R27UP 42 LEI 549300SAMIRN1R27UP42 Business Card Information: - Address: 520 East Hunting Park Ave, Philadelphia PA 19124 Entity Status: Active Managing LOU: GMEI Utility (5493) Legal Form: Corporation Record State: Public_Sources 18 Combined LEI and CUSIP requests 19 Processes and Procedures
Criteria for Assigning a CUSIP Equity Public (unrestricted) equity offering by US or Canadian issuer Private (restricted) equity offering in US by any issuer Rule 144A or Regulation D American or Global Depositary Receipts (ADR/GDR) Debt Public or private debt offering in US by any issuer SEC-registered, Rule 144A, or Regulation D 20 Processes and Procedures Criteria for Assigning a CINS Equity Equity offered exclusively outside the US and Canada Reg S stock offering by US company on UK AIM Exchange or in Germany Public offering in US by non-US or Canadian issuer (except ADR/GDR) Cayman Islands, Bermuda, and British Virgin Islands Debt
Debt offered exclusively outside the US and Canada Eurobonds Regulation S (any issuer) 21 Processes and Procedures General Procedures Requester selects appropriate template at www.cusip.com Express service for processing in 1 hour or less REACH and FIRST mechanisms for large volume requesters Must upload appropriate legal documentation Prospectus or Official Statement for new offerings (can be preliminary) Certificate of Amendment or similar for effecting corporate actions New offerings Public or Private Pre-sale/pre-trade Corporate Actions Name change, merger, reorganization, Chapter 11 or reverse stock split 22
Processes and Procedures: Request Workflow 23 Tools for High Volume Requesters CUSIP REACH allows retail CD brokers to request CUSIP numbers electronically CUSIP FIRST lets requesters fast-track new bulk CUSIP identifier issuance 24 Processes and Procedures: Sample CUSIP Structure of a CUSIP CGS provides a 9-character standard CUSIP identifier for issuers and their financial instruments offered in the U.S. and Canada Example: Amazon.com Inc. Common Stock Issuer 6 char 023135 Identifies the unique name of the: Entity
Municipality Government agency A hierarchical alpha numeric convention linked to alphabetic issuer name Issue 2 char 10 Identifies the type of instrument: Equity Debt Uniquely identifies the issue within the issuer A hierarchical alpha numeric convention
Check digit 1 digit Unique CUSIP 6 023135106 A mathematical formula checks accuracy of the previous 8 characters Delivers a 1 character check result Corresponding ISIN US0231351067 25 Processes and Procedures: Sample CINS
Structure of a CINS CGS provides a 9-character standard CINS identifier for non-U.S./Canadian financial instruments Example: BT Group PLC Shares Country Code 1 char Issuer 5 char G 16612 Region or country of Issuer G is Great Britain Combined with the Country Code, uniquely identifies the
issuer Issue 2 char 10 Uniquely identifies the issue within the issuer Identifies the type of instrument Check digit 1 digit Unique CINS 6 G16612106 A mathematical formula checks accuracy of the
previous 8 characters Delivers a 1 character check result 26 Processes and Procedures Did You Know? CUSIP identifiers are not reused except for certain high-volume fixed income programs? Discount Commercial Paper, Federal Agency discount notes and TBA mortgage pools A security is assigned either one CUSIP or CINS, plus one corresponding ISIN? There are rules for determining fungibility? One CUSIP/ISIN if shares trade on multiple stock exchanges or are denominated in different currencies Separate CUSIPs/ISINs if debt issued in different tranches or classes by currency (e.g. USD tranche and EUR tranche) Separate CUSIPs/ISINs for each transfer/ownership type: SEC-registered, Rule 144A, Accredited Investors and Regulation S
27 Protecting the Data CGS staff have the knowledge and experience to spot suspicious offering documents and prevent the deals from reaching the market 28 Protecting the Data Any knucklehead can score Charles Barkley Just numbering stuff doesnt solve reference data challenges CGS Identifiers are the end result of a well-honed process As CGS operates in the pre-trade space, all major market data vendors start in some fashion with the CUSIP database Protecting the data and the ABAs IP ensures the reliability of the system Using copies of copies of adulterated databases will lead to downstream errors and failed trades 29 Protecting the Data Transparent Licensing Process Allows for sustained reinvestment on behalf of the industry:
Developing new asset classes Industry-supporting initiatives like CGS/DTCC LEI collaboration Free ISIN lookup One license allows consumption of CUSIP data from any number of authorized distribution partners Sample fees and calculator available at: https://www.cusip.com/cusip/cgs-license-fees.htm 30 Data Distribution Classifications and Ways to Access CGS Data Feeds Database Services Identifier Solution Services Portfolio Services Segment Services
Web Services CGS CUSIP Access CGS Municipal Issuer Access API Web Services CGS iPad Application Other Services and Offerings Credit derivative entity IDs for Markits RED service CUSIP Certification Program LEI Certification Program 31 Data Distribution CGS Data Feeds
CGS Database Services CUSIP/ISIN/CINS Master Files Legal Entity Identification (LEI Plus) New Issue Alert Mortgage-backed and TBA Services Private Placement for Insurance Industry (PPNs) Identifier Solution Services Linkage of related securities from same private placement (144A)
Linkage of related base-6 CUSIPs (Associated Issuers) CABRE-Related Instrument Bundle (CRIB) Three types of ISIN-CUISP-CINS linkage files Segment Services Listed Options and Single Stock Futures Syndicated Loans Hedge Funds and Funds of Funds 32 Data Distribution Focusing the Spotlight on New Issue Alert Files pushed every 15 minutes of CUSIPs assigned during previous window New issues only (no updates/changes) Best when paired with a CUSIP Master file CUSIP/CINS/ISIN Linkage Comparison
CUSIP Master with ISIN (Over 9mm US and Canadian instruments) CINS Master with ISIN (Over 5mm globally traded instruments) Global ISIN Data INC File (Driven by ISINs supplied by 120 Global NNAs) Associated Issuers Links related issuer names in the CUSIP database Issuers with multiple base numbers (e.g. NYS Dorm Authority) Issuers related via historical corporate actions 33 Data Distribution Web and Portfolio Services CGS CUSIP Access Direct access to the full CGS database
Updated in near-real time, every 5 minutes Up to 62 data elements Search by issuer, issue or identifier Additional entitlements available CGS Municipal Issuer Access Facilitates disclosure reporting under Rule 15c2-12 Updated in near-real time, every 5 minutes View, print or download all securities for a given municipality or authority Three types of ISIN-CUISP-CINS linkage files Portfolio Services
Upload up to 100,000 CUSIP/CINS/ISINs for validation and data retrieval Easy Browse/Upload interface using Excel files Provides data enrichment and identifier verification Helps maintain accurate security master files 34 Benefit Directly from the Source Data Provenance Validation & Accuracy Primary source database Ensure accuracy of CUSIP, CINS and ISIN identifiers Supported by legal documentation 50 years of historical reference data and corporate actions
Protect against dummy numbers Data expertise Cross check underlying data elements with legal documentation Speed Asset Class Coverage Real time access to IPOs, new issuance, and corporate actions Dozens of asset classes covered across public and private markets Multiple delivery options via feed or web services
Work with industry experts on expansion to new classes e.g. LSTA, NAIC, Markit 35 Glimpse of the Future 2017 and beyond New Frontiers in Asset Classes Factored Receivables Marketplace or P2P loans More in the alt space (e.g. private equity) New Asset Types and Attributes for CFI Codes ISINs for OTC derivatives ISIN embraced by ESMA as global standard for MiFID II Dedicated ANNA Derivatives Service Bureau (DSB) 36 Contact Information Executive Management - Scott Preiss, Managing Director and Global Head, CGS 212-438-6560 - Roger Fahy, VP and Chief Operating Officer, CGS 212-438-4221
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