Crest oversees the dawn of a paperless City
Wednesday 10 July 1996
The Securities and Investments Board will meet, in a ceremony next Monday, to give the regulatory approval essential before the system can be inaugurated by Kenneth Clarke, the Chancellor of the Exchequer.
The big share registrars that will use the system are also due to sign their contracts with CrestCo, the operating company, over the next 24 hours.
There have been hiccups in recent days over some of the details of the contracts between share registrars and the information network companies, Swift and Syntegra, a BT subsidiary, which handle the movement of data. These have to be signed at the same time as the contracts with CrestCo.
But Tom Morrison, chief registrar of the Royal Bank of Scotland, which had been digging in its heels over the contract negotiations, said yesterday: "There has been some movement today and all the parties appear confident that it will be sorted out this week."
Ralph Walrond, managing director of Lloyds Bank Registrars, said: "I firmly expect all the contracts to be signed off this week. Crest will not be held up by contract squabbles and will be operational next week."
The contract disagreement was over who bears the cost of fines for delays in service if they are caused by the network providers. But Mr Walrond said he understood this to have been solved a fortnight ago and the remaining details were "not show stoppers". CrestCo agreed to put a cap on the penalties to be paid by the registrars.
Crest is the settlement system masterminded by the Bank of England when the Stock Exchange's ill-fated Taurus system was abandoned in 1993, having cost the City as much as pounds 400m in wasted outlays.
Crest, headed by Pen Kent, an executive director of the Bank of England, has so far had a direct cost - excluding spending by firms gearing up to use it - of pounds 25m, with a further pounds 4m to spend during the run-up period which lasts until next April. Shareholders, which includes the Stock Exchange with just 3 per cent, have put in pounds 12m equity, and there is pounds 17m of debt.
The first five weeks of operation will be used to set up accounts in Crest and to enter data, prior to the first settlement of a share deal on 19 August.
Mr Walrond expects about two-thirds of quoted British companies to transfer to Crest from October to December. By the end of April, more than 2,800 securities will be settled on Crest, representing 95 per cent of transaction volume on the Stock Exchange. Paper will have virtually disappeared for City institutions.
Mr Walrond said the vast majority of small private investors would not notice any difference as Crest started up and dismissed fears that dealing costs would rise, saying the worst that could happen was that costs to small investors would stay the same.
He said the workload of registrars such as Lloyds after switching to an electronic system would be unaffected since small investors, who own about 20 per cent of British equities, account for 80 per cent of the volume of work for registrars. The dramatic change would be for institutional shareholders, who account for most of the value of shares on the Exchange but only 10 per cent of the work for registrars.
Over the next few years, it is planned to reduce the Crest settlement period from the present five days, first to three days and then to immediate payment on delivery. Mr Walrond said it would also be "hugely beneficial" for London as an international market if Crest was combined with the Bank's Central Gilts Office in a single settlement organisation.
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