The Player-Iain Saville, Chief executive of CRESTCo: Riding the electronic crest of a financial wave
Wednesday 14 April 1999
CHALLENGE: "To win the hearts and minds of our customers," says Mr Saville, following the "monumental flop" that was Talisman, the old Stock Exchange settlement system. His mission is to persuade retail investors to follow institutional investors and "move into an electronic world" where there are no paper share certificates.
CORPORATE BACKGROUND: Mr Saville set up CRESTCo in 1994, while on secondment from the Bank of England. In 1997, he left the Bank to complete the establishment of CREST, the electronic settlements system for corporate securities in the UK and Ireland, which was the successor to the failed TAURUS project. CREST was delivered on time and to budget in July 1996. "We have the most capable real time settlements system in the world," said Mr Saville. He was elected chairman of ECSDA, the association of European Depositories, in March 1998.
Prior to joining CRESTCo, he worked at the Bank of England as an economist. From 1986-93, he managed the UK's $40bn (pounds 25bn) of foreign reserves in bond and money market derivatives worldwide.
STRATEGY: Mr Saville sees CREST as a "great technical platform for the future". The objective is to persuade businesses, regulators and customers to settle additional financial instruments, other than equities, through CREST.
Over the next 18 months, gilts and money market instruments will start to be settled through CREST with the hope that unit trusts and other mutual funds will follow at a later date. Fidelity, M&G, Gartmore and Royal Sun Alliance have all expressed support for the idea. Mr Saville says: "We are giving them the opportunity of a much-enhanced, secure distribution channel to the wholesale market."
According to Mr Saville, electronic settlement through CREST would be cheaper, quicker and would allow customers to make further use of their investment in CREST systems. This, in turn, is expected to drive down costs all round the financial services industry. CREST offers "a single market of excellence in cash market settlement", says Mr Saville.
The industry is now routinely processing volumes thought unimaginable four or five years ago. CRESTCo currently settles about 150,000 transactions each day, worth pounds 35bn. Before CREST, one in five trades failed to settle on time. Now that figure has improved to fewer than one in 20, with most of the problems originating in bargains where people are using paper share certificates. For large institutions the error rate is below one in 100. Over 80 per cent of the market capitalisation of UK shares are now held in electronic form. "I would be surprised if customers don't think CREST is working for them," said Mr Saville.
He is also keen to foster closer relationships with other major European settlement systems, although he says "building these links is not easy". A common model will have to be agreed, to enable stock issued in one country to be held and settled in another.
"We have shared interests in opening up our systems to each other," says Mr Saville, who forecasts good market growth in the short to medium term. But competition may prove to be a problem in the long term. "The end game is likely to be a single hub for Europe," says Mr Saville.
In July, a link will be made to Switzerland, with other countries to follow in due course. The major use of the links, initially, is likely to be for the settlement of small and medium-sized trades in European securities. CREST's objective is to make holding and settling European securities look as similar as possible to holding and settling UK and Irish securities.
MANAGEMENT STYLE: "Intensely open and consultative, but hard-driven," says Mr Saville. One hundred and eighty people are employed in open-plan offices at CRESTCo - very few of them are conventional back office people. There is a "very flat, open and co-operative management structure", says Mr Saville. "People should be able to participate in the development of the business."
MOST ADMIRES IN BUSINESS: Howard Davies, chairman of the Financial Services Authority (FSA). "He has brought good humour, elegance and energy to starting to create a unified regulator," in Mr Saville's opinion.
He also respects Iain Vallance, chairman of BT, "who did a wonderful job of turning BT into a real business using both drive and energy". In both cases, Mr Saville says leadership was important added to the ability "to take people in a new direction".
CITY VERDICT: Matthew Orr, managing partner at Killik & Co stockbrokers, thinks most people are "impressed with what CREST has achieved in the aftermath of the TAURUS fiasco. Ian Saville and his team have really shown great strength in driving the project forward," said Mr Orr, whose clients are keen to invest in the likes of Nokia, Siemens and some of the American technology stocks.
"CREST is the best hope we have got for European settlement," says Justin Urqhuart Stewart, corporate development director of Barclays Stockbrokers. At the moment, because of the plethora of charges involved, most private investors are better off with investment trusts or unit trusts if they want to hold overseas shares.
Mr Urqhuart Stewart says that the proof of whether CREST's European links have worked will be when "I can settle a trade in Deutsche Telecom for much the same cost as I can for BT".
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