What Is the Stock Exchange Daily Official List (SEDOL)?
The stock exchange daily official list (SEDOL) is a seven-character identification code assigned to securities that trade on the London Stock Exchange and various smaller exchanges in the United Kingdom. SEDOL codes are used for unit trusts, investment trusts, insurance-linked securities, and domestic and foreign stocks. SEDOL codes are comparable to CUSIP numbers, which are codes issued by the Committee on Uniform Securities Identification Procedures for stocks traded in the United States.
Understanding the Stock Exchange Daily Official List (SEDOL)
New SEDOL codes may be issued for a number of reasons, including changes in corporate headquarters, corporate mergers, the issuance of a new ISIN, takeovers, company name changes, and when share reclassifications occur.
The Makeup of SEDOL Classification Codes
All SEDOL codes have seven characters, split into two parts: the first six characters are an alphanumeric code, and the seventh character is a trailing check digit. Within the alphanumeric part, letters from B to Z are allowed while numbers from 0 to 9 are allowed as numerals.
SEDOL codes that were issued before January 2004 were strictly composed of numeric characters. Since January 26, 2004, SEDOL codes have been issued sequentially with both numbers and letters, starting with B000009. For each character position, numbers always go before letters, and vowels are never used. Therefore, SEDOL codes issued after January 2004 begin with a letter.
The check digit for the SEDOL code is selected in order to make the weighted sum of all seven characters a multiple of 10. This digit is calculated using the weighted sum of the first six characters. Letters are assigned numbers for this process: Each letter equals nine plus the number that correlates to its position in the alphabet. For example, C would equal 12 (9 + 3).
- SEDOL Codes are unique seven-character alphanumeric identifiers assigned to securities that trade on the London Stock Exchange and other smaller exchanges in the United Kingdom.
- SEDOL codes have a unique checksum character assigned at the end. The seventh digit is a weighted sum of the first six characters.
- SEDOL codes are an important innovation because they have decreased trade costs and increased the efficiency of trade and securities transactions.
The Significance of SEDOL Classification Codes
The London Stock Exchange credits the SEDOL as an important and unique market-level security identifier that is recognized globally, decreases costs incurred by trade failure across borders, and increases the efficiency of trade and securities transactions. SEDOL codes help the United Kingdom's exchanges provide a higher caliber of service by reducing such failures and streamlining the trading process.
Several characteristics of SEDOL codes make them vital and significant. Unique, assigned country-level numbers make for easy identification, with one assigned to each country. SEDOL codes are also prompt, with reduced issuance processing time frames. One last characteristic that makes SEDOL codes significant is commonality: Codes are allocated to every country for listed and unlisted securities, and they cover every asset class.
Ultimately, SEDOL codes are apropos in today’s worldwide marketplace, as exchanges need a secure and identifiable method of tracking assets being traded. London and the United Kingdom rely on SEDOL codes for their uniqueness and efficiency in tracking assets, and for their ability to ensure that investors buy the correct stocks.
Example of SEDOL Classification Codes
Banking giant HSBC was listed on the London Stock Exchange (LSE) in 1991 and has a SEDOL code of 0540528. To check whether the reported SEDOL number is correct, traders must multiply digits with their assigned weight and add them. If the resulting number is a multiple of ten, then the code is correct.
In HSBC's case, the calculation would be as follows:
0+5X3+4X1+0+5X3+2X9+1X8 = 60, which is a multiple of 10.