City money brokers that specialise in stock lending - allowing market-makers to cover their positions by borrowing shares from institutions for a fee - are worried by the move away from two-weekly accounts to 10-day rolling settlement.
Roughly pounds 2bn of 'borrowed' UK shares are outstanding in London every day. Patrick Mitford-Slade, of Cazenove, chairman of the Money Brokers Association, said: 'The amount of work will go up by about 10 times, the volume of paper going through the system will be multiplied three or four times, but the value (of the stock loans) will only go up by 25 per cent.'
The switch to rolling settlement is a vital preliminary to the introduction of Crest, a computerised share settlement system under development by the Bank of England which will take paper out of the system. Crest replaces Taurus, a more complicated system which had to be ditched nine months ago at a cost of pounds 300m.
Some money brokers are worried that the mistakes that led to the abandonment of Taurus are being made again.
Mr Mitford-Slade, however, is satisfied that the Bank is consulting fully on the development of Crest. The problem was that rolling settlement was being introduced before Crest and while share certificates still dominated the system, he said. Most City observers think Crest is at least two years away.
David Hopton, of Sheppards Money Brokers, said he had 'some concerns' over rolling settlement in a paper-based system. There might be liquidity problems in second-line UK equities, for instance.