ISIN coding is an essential system implemented to identify and distinguish mutual funds. In this article, we cover the following topics:
The International Securities Identification Number or ISIN Code is a unique code that is used to identify specific securities. The National Numbering Agency (NNA) – a country-specific establishment – allocates ISINs for all the securities issued in the country.
1. History of ISIN System
The ISIN numbering system dates back to the year 1981. However, it wasn’t widely used until the year 1989. That year, the Group of 30 (G30) nations called for all their members to adopt the numbering system and use it to distinguish between various investment tools. A year later, the International Organisation for Standardisation (ISO) joined the group and started using the ISO 6166 standard as its initial reference. Until the start of the 21st century, the ISIN code data was distributed using disks until transmission via the internet. In 2004, the ISIN code became even more important when the European Union (EU) mandated the use of the system for significant regulatory reporting needs.
2. Main Features of the ISIN
All those involved in trading securities internationally have to use the ISIN numbering scheme. In that sense, the ISIN numbering is the de facto standard for securities trading. The United States and Canada, however, use the CUSIP numbering system that is similar to ISIN.
The main features of this system are as follows:
a. Twelve-character numbering
All ISIN codes have 12 alphanumeric characters. This is how the numbering code is broken down:
a. First two letters refer to the country in which the issuing company is headquartered.
b. The next nine digits link back to the specific security and act as a unique identifier.
c. The final character also referred to as the ‘check digit’ prevents forgery.
For instance, here’s an ISIN number for an Indian company’s stock certificate:
On the other hand, a company located in the US could have an ISIN, which appears as US-000K0VF05-4.
b. Computer-generated code to protect against counterfeiting
The nine digits of the ISIN which are security-specific codes are computer-generated using a complex formula. The code is critical in preventing counterfeiting and forgery.
c. Governed by the International Organization for Standardization (ISO)
International Organization for Standardization (ISO 6166) currently defines the structure of the ISIN system. At present, the law states that an ISIN can be attributed to most forms of securities, which includes (but is not limited to) equity shares, units, depositary receipts; debt instruments (bonds, stripped coupons, and principal amounts), T-bills; derivatives; commodities, and currencies.
3. ISIN in India
In India, the task of issuing ISIN for various securities has been assigned by SEBI to the NSDL – National Securities Depository Limited. For government securities, the allotment of the ISIN code is regulated by the Reserve Bank of India.
The NSDL was established in August 1996, under the aegis of the Depositories Act, 1996.
You can use the NSDL website to look up and verify ISIN codes.