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A market identifier code (MIC) is used in global trading to identify the stock market, securities exchange, or other financial market where a trade takes place. The International Organization for Standardization (ISO) proposed a universal identification method in the 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 identifier code for the London Stock Exchange would be XLON.
The ISO 10383 standard was advanced to facilitate the automated processing of trades. An internationally accepted system of market identifiers would be a step toward the straight through processing (STP) of trades in the securities industry. Once a trade is recorded, the information would propagate throughout financial networks, cutting transaction time and lowering exposure to risk. To achieve this goal, a number of identifiers must find universal acceptance. Not only the market identifier code, but also common indicators for the type of security traded and the currencies involved must be implemented consistently in 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 Daily Official List (SEDOL) assigns a code to all securities traded in United Kingdom markets, including the London Stock Exchange. An ISO standards compliant market identifier code is incorporated into a seven-character alphanumeric identification code for each security subject to trade.
In North America, the Committee on Uniform Security Identification Procedures (CUSIP) assigns a unique nine-character alphanumeric identifier to stocks and registered bonds. Similarly, several countries have independent national numbering agencies (NNA) that assign identification codes to securities traded in their markets. An international standard for securities identification, the International Securities Identification Number (ISIN), has been adopted that uniquely identifies a security, though without indicating the origin of the trade. SEDOL accomplishes 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 in referencing a market identifier code. SWIFT does not perform any clearing or processing functions, however. A clearing house in each separate market matches 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 takes place. A uniform method of reference, beginning with a universal market identifier code, would permit STP and the same day settlement of trades.
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