Using Issuer Identity to Deduplicate Equity Market Capitalization
Summary
The document explains why an ISIN should not be treated as a unique identifier for a company. An ISIN identifies a financial instrument, and one issuer may have multiple instruments, including different equity classes or a depositary receipt representing shares traded in another market. Counting a local listing and its depositary receipt as separate company exposures can therefore inflate a market-capitalization total.
For aggregation, the response recommends linking each equity instrument to its issuer and obtaining capitalization at the issuer level. It identifies the Legal Entity Identifier as a possible global issuer identifier when a data provider supplies it; otherwise, the provider’s issuer identifier may be needed. The example raises the possibility that an overseas-traded receipt is duplicating exposure to the same company. The document does not give a universal procedure for classifying every receipt or share class, so accurate deduplication depends on reliable instrument-to-issuer mappings and suitable issuer-level data.
Key ideas
- An ISIN identifies a financial instrument rather than a company.
- One issuer can have several instruments, including multiple equity classes and depositary receipts.
- Counting a depositary receipt alongside its underlying equity can overstate company market capitalization.
- Aggregate capitalization by linking instruments to their issuer.
- An LEI can help identify an issuer when the data provider supplies it.
Tags
Full text
# Is an ISIN unique per company (or what else is)? # Is an ISIN unique per company (or what else is)? Example: Tencent Holdings Ltd. KYG875721634 (Hongkong) in HKD US88032Q1094 (OTC) in USD An important factor of my stock picking is the market capitalization. Both listings have a similar (but not identical) number of stocks in my datasource. This might just be a problem in the database of my data provider and the number of stocks is actually the same for both listings. But it might also be a different type of stock. How would I know? If I disregards the OTC listing, I might apply to little weight to the stock. From looking at this example I am quite sure that I must disregard the OTC listing, otherwise the total market capitalization of Tencent is incorrectly too high. I just don't know how to programmatically decide what the correct capitalization is. ## Answer by fralau (score 6, accepted) https://quant.stackexchange.com/a/41041 Not really. The ISIN identifies a financial instrument, regardless of the market on which it is traded. The same company can issue several financial instruments (e.g. equity, bonds, etc.). In particular, the same company can often issue several classes of equity. Note, also, that an ISIN could be a* depository receipt *for another equity (to keep things simple, it is a new financial instrument that serves as a proxy for another market); it seeems that US88032Q1094 is indeed an American Depositary Receipt (ADR) for Tencent Ltd, which is a HK company. So if you want to avoid a deduplication, you should exclude the Depositary Receipts. Note, however, that the only rational way of getting the total market capitalization of a company if you have an ISIN, is to get that information at the level of the company that issued the equity (issuer). That should be an easily obtainable piece of information from your provider. The issuer is an attribute of the financial instrument, so that gives you the link. Companies should be identified with a global code called LEI (Legal Entity Identifier). If your data provider gives the LEI of the issuer of your equity security, that would be useful. Otherwise you will have to go along with whatever identifier your provider gives for the issuer. But in any case, you should go, if you can, from the instrument to the issuer and then find the market capitalization as an attribute of the issuer.
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