Exchange's ambitious technology plans are hurting private investors

STOCK MARKET WEEK

Many claimed it would never happen but investors are going to be charged for exercising their right to remain outside Crest nominee accounts and receive paper share certificates.

One leading investment house is believed to be planning to, in effect, give a discount to investors who are prepared to disappear into its nominee system.

But leading private client stockbroker Greig Middleton is doubling its administration charge for clients who want to retain paper certificates.

It is introducing a pounds 7.50 payment for contract notes "to reflect compliance and settlement costs" for clients on the nominee list.

"For those not in nominees, or otherwise unable to settle electronically, the charge will increase to pounds 15 in due course," a spokesman said.

Norman Andrews, GM's chief executive, said the doubled payment for non- nominee clients reflected the increasing cost of paper settlement, embracing transfer forms and certificates. "However we intend delaying the introduction of this higher charge to allow clients to transfer to a system of settlement compatible with Crest, such as our own nominee company," he said.

Crest is the computerised settlement system which has come in for heavy criticism from some private client stockbrokers.

It will face its biggest test yet this week as the huge Halifax flotation hits the stock market. Many market firms, big and small, fear the Crest performance will leave much to be desired.

There will, without doubt, be a Halifax stampede. Institutions need to buy and private client brokers are known to have long lists of orders; if trading is as heavy as indicated the Crest system could be choked. True, the old paper settlement arrangement would probably have been overwhelmed but the pounds 25m computerised set-up should, after all, be sufficiently sophisticated to take the strain.

Introduced last summer, it has had plenty of time to get its act together. Yet private client stockbrokers have complained bitterly their back offices are often forced to work late into the evening, incurring extra costs, because of the system's deficiencies.

It is the successor to Taurus, which has achieved an unenviable place in City folklore. After costing an incredible pounds 400m the most costly disaster to hit the Stock Exchange was abandoned in 1993.

Crest, of course, is a manifestation of the Stock Exchange's desire to keep pace with markets around the world. In these days of international trading, electronic settlement is clearly essential for any ambitious share market.

But, as is so often the case in the hectic scramble to satisfy the big boys, it is the small man, in this case the private investor, who loses out.

Under Crest private shareholders have five choices. They can operate through their broker's nominee company, join an outside nominee company, such as one run by a solicitor, or become a sponsored member of Crest, which should cost no more than pounds 20 a year.

There is also the opportunity to carry on as before, including collecting share certificates (at extra cost). The fifth and most damaging option from a Stock Exchange point of view would be if an uncomfortable number of private investors gave up stock market investing altogether.

If many did adopt such a policy it would be a disconcerting development for many stockbroking firms whose very existence depends on the small player.

There is no doubt life is getting much more difficult, and expensive, for the private investor. Settlement periods have been reduced, with instant settlement presumably the ultimate step, and the appearance of nominee accounts means the link, already fairly tenuous, with the company in which an investment is made is smashed completely.

Unless the nominee company is prepared to supply yearly reports they will no longer drop through private shareholders' letter boxes and such joys as attending the yearly shareholders' meeting will be difficult to achieve. Small dividend payments will be retained until the nominee company has collected enough cash to, in its eyes, make a payment worthwhile. And shareholder perks are often cut off.

Nominee arrangements have other disadvantages. There is the rumoured case of a group of investors putting cash into Halifax through a nominee. They were not pleased when they discovered their individual share entitlements were lost and they were forced to divide the single and smaller nominee allocation between them.

In the remorseless advance of computerised trading there seems to be few resolute souls around to champion the case of the small investor.

Although dwarfed by the institutional battalions in valuation terms they represent a substantial number of the daily bargains recorded.

It is time some relief was offered. The small player seems to have lost out in all the high technology initiatives. There must now be the looming danger that companies may feel the climate is right to press for dispensing with individual share certificates altogether. That would be a dispiriting development. With the gap between the needs of big and small investors looming wider and wider there may be a requirement for some form of two- tier market. Perhaps GM's decision to charge more for paper settlement is a tentative sign a dual-level market will eventually emerge.

Footsie fell sharply on Friday but still seems to be on course for the 5,000 points so many now predict. Second and third liners, however, remain on the sidelines.

The Blair blue chips surge has prompted Legal & General's investment team to lift its 12- month forecast from 4,200 to 4,700. "With a dividend yield sub 3.6 per cent investors should now be adopting a cautious posture just on economic fundamentals, let alone any possible damage inflicted on the corporate sector by Gordon Brown," the team says.

"However, we are not bearish. Dividend growth of 8 per cent looks to be a sustainable prospect and institutional liquidity remains historically very high. We believe this justifies a neutral position."

Boots is the main profits performer this week. On Thursday it should produce yet another healthy performance with year's profits of pounds 528m against pounds 493.5m. Today publisher Emap is expected to report year's profits of pounds 120m against pounds 86.5m. Others reporting this week include Railtrack (pounds 305m against pounds 261m) and Vodafone pounds 495m (pounds 467.9m).

News
More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about the paper circle - completely obsolete today
News
people'I’d rather have Fred and Rose West quote my characters on childcare'
Life and Style
The new Windows 10 Start Menu
tech
Arts and Entertainment
There has been a boom in ticket sales for female comics, according to an industry survey
comedyFirst national survey reveals Britain’s comedic tastes
PROMOTED VIDEO
Travel
Bruce Chatwin's novel 'On the Black Hill' was set at The Vision Farm
travelOne of the finest one-day walks you could hope for - in Britain
Sport
footballManchester City 1 Roma 1: Result leaves Premier League champions in danger of not progressing
Arts and Entertainment
Gay and OK: a scene from 'Pride'
filmsUS film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
News
i100
Life and Style
Magic roundabouts: the gyratory system that has excited enthusiasts in Swindon
motoringJust who are the Roundabout Appreciation Society?
Arts and Entertainment
Hilary North's 'How My Life Has Changed', 2001
booksWell it was good enough for Ancient Egyptians and Picasso...
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?
Why do we like making lists?

Notes to self: Why do we like making lists?

Well it was good enough for Ancient Egyptians and Picasso...
Hong Kong protests: A good time to open a new restaurant?

A good time to open a new restaurant in Hong Kong?

As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
Paris Fashion Week: Karl Lagerfeld leads a feminist riot on 'Boulevard Chanel'

Paris Fashion Week

Lagerfeld leads a feminist riot on 'Boulevard Chanel'
Bruce Chatwin's Wales: One of the finest one-day walks in Britain

Simon Calder discovers Bruce Chatwin's Wales

One of the finest one-day walks you could hope for - in Britain
10 best children's nightwear

10 best children's nightwear

Make sure the kids stay cosy on cooler autumn nights in this selection of pjs, onesies and nighties
Manchester City vs Roma: Five things we learnt from City’s draw at the Etihad

Manchester City vs Roma

Five things we learnt from City’s Champions League draw at the Etihad
Martin Hardy: Mike Ashley must act now and end the Alan Pardew reign

Trouble on the Tyne

Ashley must act now and end Pardew's reign at Newcastle, says Martin Hardy
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?