The London Stock Exchange has entered into a strategic collaboration with FOW TRADEdata, aggregator and distributor of reference data for exchange traded derivatives, with the aim of bringing Sedol instrument codes fully into the futures and options market. As a result of the relationship, Sedol codes, in addition to other identification codes used within the industry, will be distributed through FOW TRADEdata’s symbology mapping service TRADEstep. This should enable more efficient trade processing, settlement and compliance of futures and options, the partners say.
The TRADEdata service provides back offices with a solution for the sourcing and application of static data in automated clearing and settlement operations. Available on a daily, weekly or monthly basis, data can be delivered in most text file formats or XML.
When the LSE consulted with customers that use Sedol codes today, and Mark Woolfenden, the managing director of FOW TRADEdata spoke to his clients about their use of identification codes in the futures and options space, the two organisations agreed it would be good for both sets of customers to expand the Sedol range to include global futures and options.
Due to the increasing number of requests for new Sedol codes, and with the existing numeric codes reaching their capacity, the Sedol Masterfile service was re-launched in March 2004 (Reference Data Review, March 2004), with the message being conveyed, according to Mark Husler, the LSE’s head of reference data, “that the codes were used widely and in many different markets already, but we wanted to expand the coverage into more geographies and asset classes”.
“This has been part of our strategy for a while on the back of customers indicating to us back in 2004 that they would like Sedol codes to be allocated to all global instruments because they value the data, and if their systems are using Sedol codes then it is certainly their preference to have as much coverage as possible,” continues Husler. “With the re-launch the database went live with a quarter-of-a-million securities, predominantly equities and fixed income. We are now running at about 2 million securities and this relationship with FOW TRADEdata, where they will effectively be our supplier of futures and options data, will allow us to expand our database with another (roughly) three-quarters-of-a-million codes.”
There are some 1100 companies using the service for Sedol data globally. According to Husler, this kind of partnership ensures that those clients get the significant benefit of a large expansion of Sedols available to them. Forming this kind of partnership (in the Sedol world) is not something that the exchange has done a great deal of in the past, LSE says, but it is something that it would consider in the future if it’s mutually beneficial on both sides.
“Our relationship with FOW TRADEdata will be one whereby it is mutual benefit,” Husler says. “We will be working with them to ensure that we are updated on a daily basis of new derivatives that are brought to market on global exchanges to enable us to allocate the unique identification data (Sedol) and also link it to other reference data such as the underlying security as an example,” he adds. “The relationship will allow us to better allocate and provide for these types of contracts. The benefit for FOW TRADEdata is that we will provide those Sedol codes, once allocated, back to them in a way that they can automatically populate into their database which then goes on to their customers.”
The primary benefit that the LSE takes from this partnership is having a new partner to work with that will provide up to date daily notifications of new derivatives, which is quite key to the exchange, according to Husler. “It allows the automation of the allocation of this data in a greater way than we have been able to do previously. Three-quarters-of-a-million is the number I estimate will be added to the database for expansion as part of a daily changing number, so it’s really going to help us to grow the Sedol coverage quickly.”