Valoren Number

A Valoren number is a unique identification number assigned to financial instruments in Switzerland. This number helps in uniquely identifying securities, such as stocks, bonds, and other financial instruments, facilitating their trade and settlement within Switzerland and worldwide.

What is a Valoren Number?

The Valoren number is a numeric identifier, typically six to nine digits long, assigned to financial instruments traded in the Swiss financial system. Unlike the well-known International Securities Identification Number (ISIN), which is used globally, the Valoren number is specifically used within Switzerland. Despite its local origin, it is widely recognized and used in international transactions involving Swiss securities.

Purpose and Use

The primary purpose of the Valoren number is to streamline the process of identifying, trading, and settling securities within the Swiss financial market. By providing a unique identifier for each financial instrument, the Valoren number eliminates confusion and errors that could arise from the use of multiple identification systems. It ensures accurate and efficient handling of securities transactions, thereby enhancing the overall reliability and efficiency of the financial market infrastructure.

Valoren Number Structure

A Valoren number is typically a six to nine-digit numeric code. Unlike ISINs or CUSIPs, it does not include alphabetic characters or embedded country codes. Instead, it is purely numeric, making it straightforward to implement and use in various automated systems.

The simplicity of the Valoren number’s structure makes it particularly suitable for use in electronic trading and settlement systems. Its numeric nature ensures compatibility with a wide range of computer systems and databases, facilitating its integration into existing financial infrastructure.

How to Obtain a Valoren Number

Valoren numbers are assigned by SIX Financial Information, a subsidiary of the SIX Group, which operates Switzerland’s financial market infrastructure. SIX Financial Information is responsible for maintaining the Swiss securities database, ensuring that each instrument listed in the database has a unique Valoren number.

To obtain a Valoren number for a new financial instrument, issuers typically need to submit a formal request to SIX Financial Information. This process involves providing detailed information about the instrument, including its issuer, type, and key characteristics. Once the request is processed, SIX Financial Information assigns a unique Valoren number to the instrument, which is then used for its identification in all relevant financial transactions.

Comparison with Other Identification Systems

The Valoren number is one of several identification systems used in the global financial market. Each system has its specific use cases and advantages:

ISIN (International Securities Identification Number)

The ISIN is a 12-character alphanumeric code used globally to identify securities. It includes a country code, which identifies the country of the issuing entity, followed by a national identifier and a check digit. The ISIN is widely recognized and used in international transactions, making it the predominant identification system in the global financial market.

CUSIP (Committee on Uniform Securities Identification Procedures)

The CUSIP is a 9-character alphanumeric code used primarily in the United States and Canada. It is managed by the American Bankers Association and Standard & Poor’s. The CUSIP is used for securities traded in North America and provides detailed information about the issuer and the type of security.

SEDOL (Stock Exchange Daily Official List)

The SEDOL is a 7-character alphanumeric code used primarily in the United Kingdom and Ireland. Managed by the London Stock Exchange, the SEDOL is used to identify securities traded on UK exchanges.

WKN (Wertpapierkennnummer)

The WKN is a 6-character alphanumeric code used primarily in Germany. It is managed by the German securities depository, Clearstream, and is used to identify securities traded on German exchanges.

While the ISIN, CUSIP, SEDOL, and WKN are widely used in their respective regions, the Valoren number remains the primary identifier for securities in Switzerland. Its simplicity and ease of use make it a valuable tool for market participants operating within the Swiss financial system.

Advantages of the Valoren Number

The Valoren number offers several advantages for market participants, including:

  1. Simplicity: As a purely numeric code, the Valoren number is easy to implement and use in electronic systems.

  2. Efficiency: By providing a unique identifier for each security, the Valoren number ensures accurate and efficient processing of transactions.

  3. Compatibility: The numeric nature of the Valoren number ensures compatibility with a wide range of computer systems and databases.

  4. Local Recognition: The Valoren number is widely recognized and used within Switzerland, making it an essential tool for market participants operating in the Swiss financial market.

Challenges and Limitations

Despite its advantages, the Valoren number also has some limitations:

  1. Regional Scope: The Valoren number is primarily used within Switzerland and may not be recognized or used in other markets.

  2. Lack of Information: Unlike the ISIN or CUSIP, the Valoren number does not provide detailed information about the issuer or type of security.

  3. Integration: Market participants operating in multiple regions may need to manage multiple identification systems, including the Valoren number, ISIN, and CUSIP, increasing complexity and administrative burden.

Role in Algorithmic Trading

In the realm of algorithmic trading, unique identifiers like the Valoren number play a crucial role in ensuring the precise identification and swift handling of trades. Algorithmic trading systems rely on these identifiers to efficiently execute trades, manage orders, and ensure compliance with regulatory requirements.

Algorithmic trading systems often handle a vast number of trades in real-time, making the accuracy of security identification paramount. The use of Valoren numbers enables these systems to quickly and reliably identify Swiss securities, reducing the risk of errors and ensuring smooth operation.

Fintech Implications

In the fintech sector, the Valoren number supports various innovative financial services and products. From digital trading platforms to robo-advisors and blockchain-based solutions, the unique identification of securities facilitated by the Valoren number enhances the efficiency and reliability of fintech applications.

Digital Trading Platforms

Digital trading platforms benefit from the use of Valoren numbers by ensuring accurate and efficient handling of Swiss securities. These platforms rely on precise identification to manage orders, execute trades, and provide real-time information to users.

Robo-Advisors

Robo-advisors use Valoren numbers to build and manage investment portfolios that include Swiss securities. By accurately identifying and tracking these securities, robo-advisors can provide users with reliable investment advice and performance tracking.

Blockchain and DLT

Blockchain and distributed ledger technology (DLT) are increasingly used to tokenize securities and facilitate peer-to-peer trading. The Valoren number plays a crucial role in these processes by providing a unique and reliable identifier for Swiss securities, ensuring accurate and transparent transactions on blockchain platforms.

Conclusion

The Valoren number is a vital component of the Swiss financial market infrastructure, providing a unique and efficient identification system for securities. Its simplicity, compatibility, and local recognition make it an indispensable tool for market participants operating within Switzerland. While it may not offer the global reach or detailed information of other identification systems, the Valoren number remains a key asset for ensuring accurate and efficient handling of securities transactions.

In the rapidly evolving landscape of algorithmic trading and fintech, the Valoren number continues to support innovation and efficiency, enabling new financial services and products to thrive within the Swiss market. As the financial industry evolves, the role of unique identifiers like the Valoren number will remain essential in ensuring the integrity and efficiency of financial transactions.