Crest is due to begin providing paperless computerised settlement of securities transactions in the second half of 1996, replacing the Exchange's existing Talisman system. Crest was developed after the Exchange lost more than pounds 100m on Taurus, its own disastrous attempt at a paperless system. The appointment of Swift, the clearing banks' existing system for handling financial transactions, and a joint venture between British Telecom and Thomson Financial Systems, as network providers means the Stock Exchange will be one of the few leading stock markets not to handle its own settlements.
Brokers, mainly those which concentrate on serving private clients, are questioning the value of their Stock Exchange membership now that the trading facilities, regulatory control and settlement are all to be replicated elsewhere - the dreaded 'fragmentation' that successive Exchange chairmen have warned against.
Many firms that would have applied for membership in the past are instead setting themselves up as investment advisers and reaching commission-splitting arrangements with member firms. This can be an attractive option, particularly when trading volumes are as low as they have been this year.
A source at the Association of Private Client Investment Managers and Stockbrokers said: 'People do now ask what is the point of being a member of the Exchange. The only two bits of glue holding it together now are the rule book and the settlement system. If settlement goes, they ask themselves, why should they pay to be members?'
Mike Jones, a partner of Capel-Cure Myers, a big London private client broker, said: 'Firms will question what value they get from Stock Exchange membership, and question what Stock Exchange services they are going to use. It may be that the concept of Exchange membership goes out the window and firms choose from a menu of services.'
Patricia Knox, an Exchange spokeswoman, said: 'Our membership fees are low compared to most exchanges anywhere else. And members do pay separately for most services.
'They belong to a regulatory framework and have the assurance of dealing with other firms that are subject to our internal discipline.'
Ultimately,however, stockbrokers and market makers are subject to the Securities and Futures Authority, a self-regulatory organisation within the umbrella of the Securities and Investments Board.
By Friday's deadline the Stock Exchange estimated that it had received nearly 100 submissions to its consultative document on the proposed Alternative Investment Market for smaller and fast-growing companies. The deadline is being extended into this week.Reuse content