Private clients can take slow lane: There will be an alternative to speedier share deals - at a price. Vivien Goldsmith reports

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The Independent Online
PRIVATE clients will be allowed to choose a slower pace to settle share trades when a speedy dealing system is introduced next year - but at a price.

The current system of dealing within discrete dealing periods will be swept away in mid-July to be replaced by settlement 10 days after a deal is struck.

But about a year after that the settlement time will be squeezed down to five days, and the gap between trade and settlement will probably be shaved further until eventually the norm will be same-day settlement.

Geoffrey Turner, chief executive of the Association of Private Client Investment Managers, said brokers and private clients could cope with 10-day settlement without any radical changes.

'Many brokers say clients will not be able to cope with a shorter period. One rural broker has many farmers as clients and they tend to come in to settle their account on the next market day. The Government has got to offer something other than five-day settlement.'

The Bank of England, which reported this week on Crest, the new paperless stock market trading system, said investors would still be able to keep their certificates. It also endorsed giving private clients the choice of a longer settlement cycle.

Two options have emerged: allowing private clients to pay the standard price for shares plus a sum to compensate the jobber for having to wait for the stock; or a two-tier market with one price for standard quick delivery and another higher one for clients who want time to find the money or the paper certificate.

The way around the paper blitz of cheques and share certificates is for private clients to use their brokers' nominee name accounts, and to allow them to hold their cash or use the Switch plastic card for instant money transmission.

One broker, Manchester-based Henry Cooke Lumsden, started using Switch last week. John Davenport, operations director of HCL, said Switch was only being used for payment of shares. After a sale, cash was being directed to clients' bank accounts electronically.

ShareLink plans to introduce Switch payment this summer. But it will also hold customers' cash, have a nominee set-up and allow clients to hold their own certificates and take longer to settle.

David Jones, ShareLink's chief executive, strongly opposes a two- tier market with private clients dealing on a longer cycle paying a higher price for shares. He believes it would not be difficult to formulate a market-wide rate for late delivery of stock or cash, based on the cost of money. 'It would not cost a great deal - a couple of pounds on a pounds 1,000 bargain,' he said.

(Photograph omitted)

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