What is the Stock Exchange Daily Official List (SEDOL)?
The stock exchange daily official list (SEDOL) is a seven-digit code used to identify all securities listed and trading on the United Kingdom securities market. Companies and issuers use SEDOL to identify assets, such as investment trusts, insurance-based securities, and other common stock forms.
SEDOL is not to be confused with CUSIP number, which is also a unique identification number assigned to all the U.S. traded stocks and registered bonds but offered by the Committee on Uniform Securities Identification Procedures. The code also serves as a global security identifier, enhances the Systematic Transfer Plan (STP) efficiencies, and reduces the cross-border trade failure costs.
- The stock exchange daily official list (SEDOL) is a series of unique characters to each London Stock Exchange-based security that is used to identify publicly-traded stocks securely.
- The U.K. and U.S.-issued securities rely on the efficiency and uniqueness of SEDOL codes to enhance seamless and correct trading.
- SEDOL codes are essential in the modern global marketplace as a secure and identifiable approach to track stock.
The Context of Assigning SEDOL Codes
Several reasons underlie the issuance of new SEDOL codes. They include reclassifications, change of a company’s name, corporate merger, assignment of new International Securities Identification Number (ISIN) numbers, and corporate headquarter changes. After the changes made on January 26, 2004, new SEDOLS are issued sequentially.
Structure of the Stock Exchange Daily Official List
At each character position, vowels are not used, and SEDOL codes begin with numbers followed by letters. The alphanumeric code is represented by the first six characters, while the last character is referred to as the trailing check digit. Notably, SEDOL codes are only allowed to include letters from B to Z and numerals, starting from 0 to 9 within the alphanumeric part.
Until January 26, 2004, issued SEDOL codes contained numeric characters alone. However, the codes that came after the said date are issued sequentially, beginning with B000009 for both numbers and letters. While vowels are never used to represent a character position, numbers are always ordered such that they precede letters. It means that all SEDOL codes issued after the mentioned date start with a letter. Ranges with 9 as the starting character are reserved for user allocation.
A common method to ascertain SEDOL code is to determine if the weighted sum of all the characters is a multiple of 10. The code includes a check digit that verifies its correctness. For the verification process, different numbers are assigned to letters. Each letter is equivalent to the number that matches its position in the alphabet, plus nine. For example, K would be equivalent to 20 (9+11).
Impacts of SEDOL
The London Stock Exchange (LSE) recognizes SEDOL as an important market-level security identifier and a global security tool. As a result, it minimizes the costs sustained during the cross-border trade failure and enhances trade efficiency and security transactions. Through SEDOL codes, the United Kingdom’s exchanges offer high service levels by curbing such failures and streamlining the transaction processing cycles.
Particular to such regard are the features of SEDOL codes. First, they are unique, and the identification of stocks becomes seamless through the assigned country-level numbers. Each country is usually assigned one number. In the same vein, SEDOL codes are prompt, abridging the issuance processing time frames.
Another feature of SEDOL codes that enhances the trade process is commonality. SEDOL codes are extended to every asset class, and every listed or unlisted security in a certain country is allocated codes, reducing the need for multiple identifiers.
Examples of SEDOL Codes
Traders are advised to perform due diligence to ascertain the legitimacy of various companies’ SEDOL codes. To illustrate, consider the banking giant, HSBC, which was listed on the LSE in 1991 with a SEDOL code of 0540528.
Traders can determine whether the assigned SEDOL code is correct by simply multiplying each digit by its assigned weight and summing them up. In such a case, (0) + (5×3) + (4×1) + (0) + (5×3) + (2×9) +(1×8) = 60. The SEDOL code is correct because 60 is a multiple of 10.
In today’s global marketplace, trading assets need a secure and identifiable method to keep its track. It makes SEDOL codes relevant for stocks, bonds, mutual funds, and hedge funds. The U.K. and U.S.-based securities contain SEDOL codes based on their efficiency and uniqueness in trailing assets, not to mention their ability to reduce confusion among investors and ensure they purchase the right stocks.
The SEDOL Masterfile service is an example of a service company that provides traders with information regarding securities and financial instruments. Various organizations use comprehensive and global reference data to identify business processes such as price feeds processing, portfolio valuation, and trade execution.
CFI offers the Capital Markets & Securities Analyst (CMSA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful: