The London Stock Exchange is talking with data users and vendors about the development of a new securities coding system aimed at reducing the number of failed cross-border trades.
Industry estimates put the cost of failed cross-border trades to the global securities marketplace at around £2.2 billion every year. Around £460 million of this loss can be linked directly to problems identifying the securities involved in cross-border transactions, says the LSE. These include existing systems being unable to provide codes quickly enough for shortened settlement times, as well as difficulties providing codes for global securities or those with multiple listings.
One proposal being considered by the Exchange, in consultation with data users and vendors, is to change the Sedol coding structure from a seven digit numeric to a seven digit alphanumeric code to create a hugely increased number of codes.
David Lester, the exchange's chief information officer, says: "With an ever-increasing number of financial instruments, alphanumeric Sedols would allow for a much greater number of codes. More importantly, they could provide a solution to one of the major inefficiencies facing our market place - the lack of a globally recognised unique identifier for cross-border trades."
If an appropriate solution can be found, says Lester, it will be introduced as one of the LSE's new range of products.