The Short Version
Because the same company's shares might be referred to differently across brokers, exchanges, and countries, securities markets rely on standardized identification codes so that everyone in the settlement chain is unambiguously referring to the exact same security. ISIN is the global standard used worldwide; SEDOL and CUSIP are older, national numbering systems that still remain in wide use in their home markets alongside ISIN.
Explain It Like I'm 10
Think about how the same person might have a home address, a passport number, and a national ID number all at once — different systems, each needing their own unambiguous way to identify that exact same person without confusion. Securities work the same way: a company's shares might have a local code from their home market's system (SEDOL in the UK, CUSIP in the US/Canada) alongside a globally standardized ISIN, so that settlement systems anywhere in the world can pinpoint the exact same security without any risk of confusing it with a similarly named one.
Step-by-Step Example
- 1 A company's shares are listed and held through an Indian depository.
- 2 The depository allots the security a 12-character ISIN, starting with the country code 'IN'.
- 3 A custodian settling a cross-border trade quotes that ISIN in its instructions specifically so there's zero ambiguity about which exact security is meant.
- 4 If the same company were instead listed in the UK, its shares there would carry a separate 7-character SEDOL alongside their own ISIN.
- 5 If listed in the US or Canada instead, they'd carry a 9-character CUSIP alongside their ISIN — different local codes, all ultimately mapping to the same globally unique ISIN.
Quick Recap
- ✓ ISIN (International Securities Identification Number): a 12-character alphanumeric code — a 2-letter country code, a 9-character identifier, and a check digit — that uniquely identifies a specific security globally, under ISO 6166. In India, ISINs are allotted by the depositories (NSDL/CDSL).
- ✓ SEDOL (Stock Exchange Daily Official List): a 7-character alphanumeric code assigned by the London Stock Exchange, used mainly for UK and Irish securities.
- ✓ CUSIP (Committee on Uniform Securities Identification Procedures): a 9-character alphanumeric code identifying securities registered in the US and Canada.
- ✓ A single security often carries multiple identifiers at once — its own country's code (SEDOL or CUSIP) plus a globally recognized ISIN — used by different systems for different purposes.