S&P Simplifies Cusips for Rule 144a

NEW YORK-Standard & Poor's Cusip Service Bureau plans to release an identification service for Rule 144a securities later this month.

Rule 144a is a Securities and Exchange Commission (SEC) rule that modified a two-year holding period requirement on privately placed securities to allow institutions to trade these securities among themselves. This eliminates some of the restrictions placed on publicly traded instruments. Since these securities tend to be re-sales or re-offers, the instruments can gather numerous Cusip identifiers.

Maria Latorraca, product director, Cusip Service Bureau at S&P, says this creates a problem, because one offering could contain up to four different Cusip numbers. "It is not always easy to recognize that those four Cusips come from and link to the same offering," she says.

The new identification service will link all the related identifiers together in one document. "It's all about fungibility," says Latorraca. "It is not a different offering, it is the same group." It allows data managers to trace the security's US-based ISIN number back to the origins of the offer. "Anyone who is managing a securities master file will want to know the related links," adds Latorraca.

In addition to assigning Cusips for recently issued 144a securities, S&P has spent six months assigning identifiers to link historical securities, says Latorraca. "We went back, historically, to 100,000 issues," she says.

The service, expected to be available by the end of September, will be offered as a daily feed that will be updated within a master file, says Latorraca. She expects the service to offer updates on around 12 securities a day. It will be available for an additional fee on top of the Cusip database fee.

S&P has been working with one client to see how the Cusip 144a Identifier Service works in practice. Latorraca declines to name the client but says S&P's clients have been requesting this service for some time.