The London Stock Exchange announced today that it is to introduce a new global numbering system for securities. The aim is to reduce the number of failed cross-border trades.
“With brokers and their clients becoming increasingly global in operation, and focusing more on processing efficiencies, it has become apparent that the absence of a market-level, global security identifier is a major cost to the industry,” says the Exchange. “Failed cross-border trades cost the global securities industry around 800 million every year. It is estimated that 125 million of this loss can be linked directly to problems identifying the securities involved in cross-border transactions. These include existing systems being unable to provide codes quickly enough in the trading cycle, as well as difficulties providing codes for those with multiple listings.”
After discussions with users and vendors, the Exchange’s existing seven-character numeric SEDOL code will be updated to alphanumeric and fully extended to market level. The code will be introduced in 2003.
“This new system will allow us to provide a unique global security identifier to address market needs, and enable the Exchange to build on our position as a provider of the established SEDOL standard,” says David Lester, the Exchange’s Chief Information Officer. “It is another example of the Exchange’s capacity to develop the products and services that an increasingly global market demands.”
In today’s interim results announcement, the Exchange said that Information Services accounted for 50.7 million of its turnover in the first half of this year. Instrument numbering, together with the Corporate Data Warehouse initiative announced yesterday, are part of Exchange’s strategy to diversify the range of commercial products and services it offers to its customers.
Results for the first half showed turnover up 12 per cent to 119.5 million, and operating profit up 18 per cent to 40.5 million. “The Exchange continues to build upon its proven business model,” says outgoing LSE chairman Don Cruickshank. “During the period, we produced robust financial results and are recommending an 18 per cent increase in the interim dividend to shareholders. Overall, the Directors expect a satisfactory outturn for the year given current market conditions. As one of the leading exchanges in the world, keen to compete effectively, we continue to push for open markets, particularly across Europe. We welcome the recent move by Euroclear and CrestCo to merge, creating Europe’s largest settlement organisation – a major step towards delivering a single, user-owned, user-governed, exchange-neutral system across Europe. But we are disappointed by progress on the Financial Services Action Plan. Indeed the Prospectus Directive denies us the opportunity to compete.”
Clara Furse, Chief Executive, added: “The first half results show the resilience of our business and our revenue streams. Turnover rose 12 per cent, whilst adjusted earnings per share increased 17 per cent. In a period of record market volatility, we have demonstrated the strength of our competitive position and quality of our customer and product base. We continue to focus on expanding our business through initiatives such as covered warrants, the RSP Gateway and Crest Network. By developing our core services, we are securing future growth.”
The Exchange saw high trading volumes in October, with a six per cent increase in the average daily number of UK and international trades to 232,181 in the month, up from 218,798 trades in October 2001.
The total number of UK trades increased to 3.81 million in the month, up 21 per cent compared with 3.15 million in October 2001. However, the value of these trades fell by five per cent from 162 billion in October 2001 to 154 billion in 2002.
The rise in market volumes was most notable on SETS, the Exchange’s electronic order book, with a 48 per cent increase: a record 2.67 million trades in October 2002 compared with 1.80 million in the corresponding month in 2001. The average daily number of trades on SETS increased from 78,497 trades in October 2001 to 116,144 trades in October 2002.
Meanwhile, on the primary market there were 18 new issues during October 2002, 5 of which were IPOs on AIM, raising 13.04 million (October 2001: 6 IPOs – 1 on the Main Market, 5 on AIM, together raising 80.94 million).