Fortnightly account system ends next July

THE STOCK Exchange yesterday confirmed that the 172-year-old system of using a fortnightly account to settle bargains would end on 18 July next year, writes Peter Rodgers.

This is in line with the recommendation of a Bank of England working group, set up to investigate how to cope with cancellation of the Taurus system.

The account will be replaced with a 10-day rolling settlement, which the Bank committee said should be reduced to five days at the start of 1995.

An account settlement system has existed for nearly 300 years, but there have been increasing fears that it could cause a financial collapse by allowing too generous a period between purchase and payment. The objective is to move to even more rapid settlement so that firms are exposed to the risk of default for the shortest possible period.

The exchange has had to ask the Government to amend a law that came into effect only last month because of a drafting error that has forced it to disclose shareholdings above 3 per cent held in its Talisman settlement system. The move follows the introduction of the Disclosure of Interests in Shares (Amendment) Regulations 1993.

'We then anticipated we would be exempted under the new legislation, but because of an error in the framing of it we now have to issue notices disclosing shareholdings,' the exchange said. The Department of Trade and Industry confirmed that an amendment would have to be introduced to Parliament.