Stock Exchange Daily Official List

In the last decade, the volume of the securities market has increased exponentially. The total value of global equity trading worldwide was USD 37.7 trillion in Q2 of FY21. Consequently, the complexities and risks of trading have also increased. stock exchange Daily Official List, also referred to as SEDOL, is one of the many mitigants deployed to reduce the risk involved with trading.

What is SEDOL?

SEDOL is a seven-character, alphanumeric identification code assigned to securities that trade in the Stock markets of the United Kingdom. Various stakeholders use SEDOL to identify the asset class such as common stock, mutual funds, hedge funds, insurance, and investment trusts.

The significance of a unique SEDOL arises when a listed entity issues shares of multiple classes. For example, Tata Motors has equity shares with regular voting rights and differential voting rights (DVR). DVR shares have lower voting rights. At the time of purchase or sale, the trader is required to specify the type of shares.

The trading of bonds is much more complex. Companies may issue bonds with different maturities, say in 2025, 2030, and 2045. In 2030, some bonds may mature in April and others in September. Coupon rates for bonds maturing in April may be different. Each type of bond is different and entails different rights and obligations. In the international markets, the terms of the bonds may be identical but the currency for trading may be different. An issuer may have issued bonds with the same coupon and maturity in USD and Euro.

However, it is necessary to maintain the master data of SEDOL codes for each asset class. The SEDOL Masterfile (SMF) is a data repository and provides references to numerous, global securities. A universal SEDOL code is tagged to each security.

Additionally, SEDOL codes are subject to change on a case-to-case basis. SEDOL codes may be updated in case of mergers, takeover, reclassification of shares, change in company headquarters, and name change of the company.

Other major markets in the world have their system of identification. For instance, ISIN refers to the International Securities Identification Number which is used in India. In the USA and Canada, CUSIP or the Committee on Uniform Securities Identification Procedure is used.

While the unique identifier may vary, there are procedures laid down for conversion. A SEDOL may be converted into an ISIN using predefined rules. Similarly, CUSIP can be converted into SEDOL and vice-versa.

Structure of the Stock Exchange Daily Official List

SEDOL codes are structured and adhere to a set of predetermined rules. SEDOL codes begin with numbers and are followed by characters. The first six digits represent the alphanumeric code and the last digit is referred to as the trailing check digit.

Until 2004, SEDOL codes issued were strictly numeric. Since then, they have been issued sequentially beginning from B000009. Only letters from B-Z and numbers from 0-9 are to be included in the SEDOL code within the alphanumeric part. Vowels are never used and numbers precede characters. Currently, SEDOL codes begin with a letter.

The trailing digit of the code is selected such that the weighted average of all seven numbers is a multiple of ten. Each letter is allocated a number for this process. Each letter corresponds to its position in the alphabet plus nine. Hence, D correlates to 4+9 = 13. The purpose of the trailing digit is to verify the correctness of the code. Therefore, traders are advised to carefully inspect and verify the legitimacy of the SEDOL codes.

Impacts of SEDOL

The primary purpose of SEDOL is asset identification and to serve as a global security tool. Over time, SEDOL has proved to be a beneficial tool.

• Increased Efficiency: SEDOL has improved the overall efficiency in trading and minimized the cost incurred by cross-border trade failures. It has also facilitated the streamlining of the trading process.
• Reduced TATs: SEDOL codes are prompt and the issuance processing time is limited. Also, the assignment of codes at a country-level improves the turnaround time associated with it.
• Commonality: SEDOL codes cover each type of security and asset class whether listed or unlisted. Codes are assigned for securities traded in most of the major financial markets in the world. This reduces the need to issue multiple identifiers.
• Global Acceptance: Global acceptance of SEDOL codes has smoothened the conversion process of SEDOL into other identifiers. Conversely, rules are established for the conversion of other identifiers into SEDOL.

Conclusion

In conclusion, securities trading through a stock trading app is extremely dynamic and interdependent on a global level. Tracking trading assets requires a secure and identifiable method. SEDOL codes not only streamline the transacting process but also reduce confusion among investors and ensure the purchase pf appropriate securities.