Table of contents
In this article, we’re going to talk about what this list is, its importance, and why this is important for the Indian investor to be aware of.
Understanding what a SEDOL code is
A SEDOL code is a unique seven-character identifier, which can be a combination of either alphabets or numerals, assigned to a specific security. This code can represent various types of securities, including:
- Stocks (equities)
- Bonds
- Derivatives
- Exchange-Traded Funds (ETFs)
- Investment trusts
The London Stock Exchange Group (LSEG) manages the SEDOL Masterfile, a comprehensive database containing information on all issued SEDOL codes.
The structure of a SEDOL code
The seven-character SEDOL code follows a specific format:
- First character: The first character is usually alphabetic and is used to identify the security type.
- Next six characters: These can be alphanumeric and are unique to the specific security in question.
For instance, the SEDOL code for Apple Inc. common stock (AAPL), which is traded on the NASDAQ, is US037833100. Here’s a breakdown:
- US: Identifies the security as being listed in the United States.
- 037833100: Unique identifier for Apple Inc. common stock
How are these codes assigned?
The LSEG, through its subsidiary London Stock Exchange Plc., is responsible for assigning SEDOL codes. Issuers or their nominated agents can apply for a SEDOL code through a subscription-based service offered by LSEG.
Here’s why SEDOL codes are important
SEDOL codes are important because:
- They standardise securities: They establish a universal identification system for securities, eliminating confusion that could arise if different exchanges or market participants used their own proprietary codes. Without SEDOL codes, there could be significant risk of traders buying or selling unintended securities, resulting in potentially huge losses.
- Efficiency purposes: SEDOL codes streamline communication and data exchange between market participants. Because everyone involved uses the same code to identify a security, communication becomes clearer and faster.
- Different classes of the same stock: Sometimes a company might list several classes of the same stock on the same exchange with different voting rights and claims to dividends. SEDOL codes to identify the specific class of a company’s stock might be helpful when investing in multiple tranches at the same time.
Why should Indian investors care about SEDOL codes?
While SEDOL codes are not directly used on Indian stock exchanges like the NSE or the BSE, there still are some benefits to knowing the concept:
- When you’re investing in companies away from home: If you invest in stocks or other securities listed on foreign exchanges, particularly those in the UK or Europe, you’ll likely encounter SEDOL codes. These will then help you to identify and trade in the correct securities while saving time during research.
- When researching overseas listings or subsidiaries: When you’re investing in a multinational company, you might need to analyse the financials of subsidiaries the company holds abroad. If these subsidiaries are listed, they might be identified using a SEDOL code.
Frequently Asked Questions
While unlikely, the ETF information sheet in India might mention SEDOL codes for its underlying holdings, especially if the ETF invests in a smaller universe of securities. More commonly, you’ll see ISIN codes listed.
SEDOL primarily covers securities in the UK and some other European markets, while ISIN has a broader global reach. Another difference is that while SEDOL codes are only 7 characters, ISIN codes are 12 characters long.
If an Indian company has a secondary listing on a foreign exchange, you can usually find the corresponding SEDOL code on the company’s investor relations website or through the website of the foreign exchange where it’s listed.
The US brokerage platform might use SEDOL codes internally, but as an investor, you’ll likely interact with ticker symbols for placing trades.
While uncommon, some niche investment products in India, like certain types of feeder funds (also known as fund of funds) or alternative investment products investing in international assets, might use SEDOL codes in their offering documents or periodic reports.
Leave a Comment