'Split market' advocated: Institutions move in with taurus substitute proposal

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A GROUP of more than 30 of the UK's biggest institutions yesterday announced a joint plan for a replacement of the abandoned Taurus computerised share settlement system.

If adopted it would reduce the Stock Exchange's role dramatically and split the market between big operators and small investors.

Since the scrapping of Taurus last week at a total cost to the City of between pounds 250m and pounds 500m, the group, which includes all four high street clearing banks, Prudential and Guardian Royal Exchange, has moved swiftly to lobby the Bank of England securities settlement task force on the shape of a replacement system.

The proposals have been sent to the task force. They recommend the immediate cutting of the settlement period from three weeks to 10 days and 'immobilising' all share certificates in a series of warehouses.

The task force was set up to take suggestions from literally 'anyone with any ideas' and has to recommend a cheaper, simpler alternative to Taurus by the end of June.

The group wants to concentrate on a system for big institutional investors 'responsible for 85 per cent of the value of transactions processed on the London market'. It wants to build on existing institutional net settlement systems that enable brokers to group together to pay settlement fees instead of deal by deal.

Controversially, the group wants in the longer term to set up a share clearing house under the Bank of England. Terry Pearson, the senior securities adviser at Royal Bank of Scotland who prepared the group's submission, said the Stock Exchange had in effect admitted it no longer wished to handle this part of its business.