Securities market moves to e-settlement system

International settlement system provider CrestCo has completed a migration to an electronic settlement system for the UK's £160bn...

International settlement system provider CrestCo has completed a migration to an electronic settlement system for the UK's £160bn short-term securities market.

A variety of financial instruments, including UK treasury bills and certificates of deposit, will be stored and settled in real-time on the CrestCo settlement system. It replaces an old paper-based system for settling transactions.

Benefits of the move to an electronic system for market users include the cheaper settlement of trades and a reduced risk in trading because the transactions are settled instantly. Traders will also have the option to issue securities in multiple currencies.

The migration, completed earlier this week, took just under a month.

Over the past five years financial markets around the world have moved to electronic trading in an effort to speed-up the trading and settlement cycle.

Duncan Brown, consulting director at analyst firm Ovum, said the key tests for the new electronic settlement system would be its security and speed.

"When you move from a paper-based format to an IT system there are expectations that the system should process transactions faster than the old systems. And when you convert a document into an electronic format there is always the possibility of documents being tampered with, although I assume CrestCo has done its homework on this one."

CrestCo is halfway through a pan-European IT project for the financial markets. By 2005 it aims to have reduced the cost of cross-border settlement tariffs at City firms by 90%. This will be underpinned by a single settlement engine.

The new settlement system will handle more than 600,000 transactions a day across Europe.

The IT project involves the integration of existing Euroclear settlement systems for the different markets, plus the development of an overarching IT architecture and common interfaces to glue everything together.

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