An International Securities Identification Number (ISIN) is a 12-digit combination of letters and numbers. It serves as identification for securities like stocks, forwards, option certificates, funds and bonds which are traded on the stock market.
In the past, ISINs only provided second level security identification and were primarily used on statements and invoices. In the meantime, various countries in Europe have adopted ISINs as a primary security identification tool.
The use of ISINs is beneficial in that it enables the fully-automated operation of trade processing on a global level. Stock managers have the option of keeping tabs on shares traded by investors around the world in a common format.
The exact makeup of an ISIN can best be explained using an example.
An international Securities Identification Number may look like this: CH-123456789-1.
The first two letter refer to the security’s country of origin. It follows a list (ISO 6166) published by the International Organization for Standardization (ISO). The country code used is decided by the location of the issuing company’s headquarters. The example above uses the code of Switzerland.
The country code is followed by a nine-digit, alphanumerical identifier. This is the National Securities Identifying Number (NSIN) issued by the relevant country’s national numbering agency (NNA). If this identifier is made up of less than nine digits, it is completed by adding in zeros. The NSIN primarily functions as a serial number and has no additional meaning.
The last character of an International Securities Identification Number is a verification code which is meant to help prevent the use of fake numbers. It is calculated based on the preceding 11 characters using a special algorithm.