A Market Identification Code (MIC) is used to identify the stock market or financial market where a trade is made. The ISO proposed a universal identification method to facilitate automated processing of transactions, but acceptance has been slow due to various identification systems used globally. A uniform reference method would allow for STP and same-day transaction settlement.
A Market Identification Code (MIC) is used in global trading to identify the stock market, stock exchange, or other financial market where a trade is made. The International Organization for Standardization (ISO) proposed a universal identification method in publication ISO 10383. Applying this format, the code would consist of a leading “X” followed by three alphanumeric characters that identify the particular market. For example, the market identification code for the London Stock Exchange would be XLON.
The ISO 10383 standard was advanced to facilitate the automated processing of transactions. An internationally accepted system of market identifiers would be a step towards straight forward processing (STP) of transactions in the securities industry. Once a trade is recorded, the information would be propagated through financial networks, reducing transaction time and lowering risk exposure. To achieve this goal, various identifiers must find universal acceptance. Not only the market identification code, but also common indicators for the type of security traded and the coins involved must be implemented consistently across all markets.
Acceptance of an international standard has been slow. Markets, data providers and brokers in different countries use a variety of identification systems. The Stock Exchange Official List (SEDOL) assigns a code to all securities traded on UK markets, including the London Stock Exchange. An ISO compliant market identifier code is incorporated into a seven-character alphanumeric identification code for each traded security.
In North America, the Committee on Uniform Security Identification Procedures (CUSIP) assigns a unique nine-character alphanumeric identifier to registered stocks and bonds. Similarly, several countries have independent national numbering agencies (NNAs) that assign identification codes to securities traded on their markets. An international standard for the identification of securities has been adopted, the International Securities Identification Number (ISIN), which uniquely identifies a security, although without indicating the origin of the transaction. SEDOL achieves both, marking it as an important step in promoting straight-through processing.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) operates an international financial messaging network that adheres to the ISO standard by referring to a market identification code. However, SWIFT does not perform any deletion or processing functions. A clearinghouse in each separate market matches the buyer and seller transactions and assigns a settlement price for each. Typically, the settlement date for stocks and bonds is three business days after the trade. A uniform reference method, beginning with a universal market identifier code, would allow for STP and same-day transaction settlement.
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