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New CUSIPS Remove Barriers for Traders in Physical Precious Metals

Thursday, October 6, 2016 11:48
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By assigning CUSIP numbers to physical precious metal assets, including gold and silver bar bullion, Delaware Depository and CUSIP Global Services have made it easier for investors to trade and track the commodities on traditional platforms.

In mid-September, CUSIP Global Services (CGS) and Delaware Depository announced the new CUSIPs. “The unique security identifiers, which will be assigned by CGS to the Delaware Depository’s fungible products, will be used to help standardize the process of trading and tracking precious metals within investor portfolios,” the collaborators wrote.

CPM Group, a commodities research and asset management firm, called this “one significant step for precious metals markets,” in a Sept. 27 statement.

CUSIPs are “assigned to financial assets traded in the United States, facilitating assets’ trading, buying, selling, holding, and record keeping within investor portfolios. Investors and sell-side institutions use CUSIP numbers to track assets,” according to CPM. “The absence of CUSIP numbers for physical precious metals investment products was one of the mechanical aspects of financial markets that kept physical precious metals apart from mainstream investment channels and markets. Assigning CUSIP numbers to an initial 93 gold, silver, platinum, and palladium investment products allows these assets to be more readily traded, bought, sold, and kept in standardized portfolios.”

Fungible assets with CUSIPs now include gold bar bullion and coin, silver bar bullion and coin, and platinum and palladium bar bullion and coin. According to CGS, “CUSIP identifiers on individual bars can help foster more efficient trading and delivery—a market where a gold bar can be bought, sold and delivered in a matter of days rather than weeks.” The CUSIP number includes an identifier for “a given refiner, metal, weight, purity, and serial number.”

Prior to the assignment of CUSIPs, explained Jeffrey Christian of CPM, there was “no way to add physical precious metals to all portfolio management systems, since they run on CUSIP codes. These limitations mean that orders have to be manually placed. . .and managed manually. Most investors do not want to deal with these impediments and the extra work and hassles they cause. Having CUSIP codes removes some of the mechanical or infrastructural impediments that turn fund managers off to investing in physical metal.”

“Though it is arguably one of the world’s oldest asset classes, gold is one of the last to receive CUSIP identification. As markets and trading and portfolio management mechanisms become increasingly electronic, the need for a universal standard is growing quickly,” said Matthew Bastian, director of market, business and product development for CGS, in the September CGS announcement.

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Disclosure:
1) Tracy Salcedo compiled this article for Streetwise Reports LLC. and provides services to Streetwise Reports as an independent contractor. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. The companies mentioned in this article were not involved in any aspect of the article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview or article until after it publishes.

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