Fungible

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Entirely interchangeable. In the context of securities, being of the same issue, and having the same securities identification number. The same, but not, if you see, the same.

There is a great divide in the bedeviling pedantry of law, the between things that are the same but somehow, over a period of time, different; things that are different but nonetheless at a given point in time, the same; and things that don’t exist at all, but being unique representations of that nothing on a blockchain, in a Cartesian sense do exist, are still somehow different from each other. Amendment describes that first class; fungibility the second; credulous gulls the third.

So, with feeling:

• Fungible: Individual securities comprising part of a single series (and having a the same ISIN are fungible with each other.

• Not fungible: Securities from different series, even if issued by the same issuer, are not fungible with each other.
• Non-fungible: Tokenised representations of meritless gobbets of intellectual property (Banksy prints, memes, tweets etc.) that are created on a blockchain and sold to stupids are unique, by design, representations of the empty set. This picture with the lens cap on is different from that picture with the lens cap on.

Definition

Assets are fungible where their nature allows them to be replaced in whole or in part with other assets of a like nature. However, it applies only to the equivalence of each unit of a commodity with other units of the same commodity. Fungibility does not describe or relate to any exchange of one commodity for some other, different commodity.

Examples

For example shares in a company can be described as fungible as you can replace those shares with other equivalent shares in the same company. However, shares of an “equivalent” value in another company would not be considered a valid replacement.

Money can also be considered a fungible asset. If you borrow £10 from someone, you do not need to give the same £10 note back. You could give that person another £10 note, or two £5 notes, or any combination of coins that add up to £10 (as long as they are happy to accept that many coppers!)

“Equivalent” and “fungible”: la même chose

Note: in financial markets speak, “equivalent” means fungible. It doesn’t mean “somewhat like". Go see our “equivalent” article for more.

See also

• Amendment
• Equivalent
• Deeming
• True sale opinion