money market short-term CUSIP automatic

Q: How are CUSIP numbers generated for money market securities like commercial paper and CDs?

A: There are two distinct routines: one for discounted securities like commercial paper (CP) and bankers acceptances (BA), another for interest-bearing securities like CDs and medium-term notes.

For discounted securities, the automatic CUSIP is based entirely upon the maturity date of the trade. Each issuer is assigned two six-digit "base numbers" by the CUSIP authority. The first base number is good for leap years and the year immediately following (1996/97, 2000/01); the second number is good for the intermediate years (1998/99, 2002/03). The 7th and 8th digits are codes which represent the maturity month and day, respectively. In the 7th place, the letters "A" through "M" (skipping "I") represent January through December of the first year of the cycle, while "N" through "Z" (skipping "O") represent January through December of the second year of the cycle. The 8th digit represents the day, where "1" through "9" are obvious, followed by the alphabet ("A" = 10, "B" = 11, and so on, again skipping "I" and "O"). Finally, the 9th digit is simply the standard check digit, as calculated by the CUSIP check digit formula.

To give a practical example, let's suppose an issuer has "12345A" and "12345B" as its base numbers. "April 12, 1999" would be represented as the CUSIP:

    "12345B" (because the year is in the second range) + "D" (April) + "C" (12th) + "7" (check digit)

For interest-bearing securities, the situation gets more complicated, because the maturity date alone is NOT sufficient to uniquely identify the characteristics of the security. Instead, the system uses a single base number as the starting point for a pool of numbers that are used in sequence until they run out (at which point you switch to a new base number and keep going). Suppose an issuer has interest-bearing base number "12345C". In this case, the first trade for that issuer will be assigned "12345C" + "AA" + "0" (check digit). The next trade will be "12345C" + "AB" + "8". When the sequence "AZ" is finally reached on the 26th trade, the next range of trades will shuffle up to "BA" - "BZ" (and so on).

The sequential interest-bearing solution works well for sell-side customers, because they are actually responsible for assigning the CUSIP number to each new trade (in essence, they control the pool). But on the buy-side, they must take what they are given by the broker-dealer who represents the issuer. In this situation, the default CUSIP generated by the system can be overridden. The system will ask a question to ensure the user's intentions, then it will save the trade with the supplied CUSIP instead of using its own.

Last updated: 04/28/05