Moves to replace Taurus under way

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The Independent Online
ATTEMPTS were being made last night to convene an emergency meeting of bankers and investors to discuss a rapid replacement for the Taurus system for use by institutional share dealers.

Terry Pearson, senior security adviser to Royal Bank of Scotland, said he had spoken to most of the leading share custody specialists and institutions such as the Prudential and was hoping to organise a meeting in the next few days.

He favoured a central depository and clearing house for institutional trades, which represented 80 per cent of the Stock Exchange total. Retail investors should be dropped from the computerisation plans and should continue with paper-based systems, he said.

There should also be a rapid move to a system of rolling institutional settlement, which was what international investors were most concerned about. 'It would introduce credibility into the London market if we could come forward with a cheap, simple solution,' said Mr Pearson.

Pressure for a quick and cheap solution was backed by Michael Marks, chief executive of the market-makers Smith New Court, who said there should be a competitive tender for a new system as early as possible so that specialist firms which built existing settlement systems in other markets could be invited to quote prices.

He said: 'We welcome the Bank of England takeover of responsibility for settlement system, and if that results in putting system vendors in competition with each other to get the lowest possible price that would be a good thing.'

Mr Marks believed there were practical systems available that could be customised at very little cost. There was a widespread view that whatever system was chosen should be simple and should be introduced in stages.

Barclays Bank, which is involved as a share dealer, broker, fund manager and registrar, said: 'The main lesson to be learnt from Taurus is that the approach to change must be through a series of manageable phases rather than a large, complex project.'

But John Gubert, manager of group security at HSBC - which includes Midland Bank - warned that simplicity could bring different problems: 'Ideally we would like a simple system, but the question is whether a simple system is acceptable to the market place.'

Simplicity could require abandonment of features that the City and the public had said Taurus should keep, such as having shareholders' names available on registers and facilities to cope with rights issues.

The British Bankers Association said the main clearing banks had spent pounds 30m to pounds 40m on coping with the advent of Taurus, and it was 'very disappointed that the Stock Exchange had not been able to deliver on time'.

The head of one securities firm attacked the Stock Exchange's insistence on developing a settlement system in-house, saying it had been 'arrogant in ordering the market what to do when it is the market, and in the end the customers, who pay the bills'.

One banker castigated the exchange for giving no warning despite regular recent briefings with City firms.

And Ralph Walrond, head of Lloyds Bank Registrars, the largest share registrar, said it was 'disappointed that so much time and effort has been wasted'.

Some Stock Exchange officials have blamed the registrars for some of the basic defects of Taurus. The registrars blocked plans which would have replaced their businesses with a single central share registry.

Among companies with large share registers, Bass said: 'We feel a mixture of sorrow and relief that a system that may have been unsuitable was not implemented.' BT said it 'regrets that work on such a major project as Taurus has stopped'.

Marks and Spencer said: 'All along we have said that the system would have to be tested before we would commit our 300,000 shareholders to it. The system has been plagued by delay. It is wholly untested. We have put no resolution to our shareholders (to join Taurus) and that would have remained our position.'

The Treasury said it had known for two or three days that Taurus's 'serious weaknesses' had led the exchange to drop it all together, a decision that will be incorporated in the Budget tax revenue plans since the continuation of stamp duty brings a windfall pounds 1bn to the Exchequer in the next financial year.

Andrew Large, chairman of the SIB, said: 'This is a setback, but let's hope that a lot of the time, money and energy expended by all concerned will have proved to be worthwhile.'

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