Start-Of-Day Positions And The SOD File
The start-of-day (SOD) position file is the agreed record of what a book owns before trading begins, and every trade of the day is built on top of it being correct.
Before a single order goes out in the morning, every desk needs an answer to a simple question: what do we actually own right now? The start-of-day (SOD) position file is that answer — a snapshot, generated overnight, of every position in the book as of the prior close, reconciled against the previous day's trades and any overnight settlements or corporate actions. It is the foundation everything else is built on: risk limits, P&L, hedge ratios, and margin all assume the SOD file is correct.
Where it comes from
The SOD file is typically produced by back-office systems overnight, combining the prior day's closing positions with the trades executed that day, adjusted for anything that settled or changed overnight — a corporate action, a dividend, an option expiring or being exercised. By the time traders arrive, the file should reflect exactly what the book holds, ready to be checked against the broker's own records before trading starts.
Why it matters more than it sounds like it should
If the SOD file is wrong — a trade booked to the wrong account, a position that failed to settle correctly, a corporate action applied incorrectly — every downstream number is wrong too. A trader who thinks they're flat a name but the SOD file shows a residual position (or vice versa) is trading on bad information from the first order of the day. This is why checking the SOD file against an independent source, typically the prime broker's own statement, is one of the very first things a desk does each morning.
| Element of the SOD file | Why it matters |
|---|---|
| Quantity and side per instrument | Basis for every risk and P&L calculation that day |
| Average cost | Determines realized/unrealized P&L on trades |
| Settlement status | Flags positions that haven't cleared yet |
| Corporate action adjustments | Prevents phantom gains/losses from splits, dividends |
What this means in practice
A discrepancy between the SOD file and the broker's position statement should be resolved before trading, not after — trading on top of a wrong starting position compounds the error with every subsequent trade. Most operationally mature desks treat SOD reconciliation as a hard gate: no active risk-taking until the morning's positions have been confirmed to match.
The SOD file is the agreed-upon record of what the book owns before the day begins. Everything else that happens that day — risk checks, hedge sizing, P&L — is built on the assumption that this starting number is right, which is why checking it against the broker is a first-thing-in-the-morning task, not an afterthought.
Further reading
- Harris, Trading and Exchanges (ch. 5)