B.I.S.S Research White Papers

CREST Revealed on 20th Anniversary

Gary Wright

Gary Wright

A leader in financial market innovation based on in depth knowledge of financial markets processes and specialising in data. Creator of business cases for new products and services in financial markets.

London, UK July 15, 2016 – Over the last year, a team of academic researchers have been analysing one of the most successful projects to be introduced in financial services for over 20 years – the introduction of the CREST settlement system.

Their remit was to ascertain why and how the CREST project team delivered such a successful system, on time and within budget. Today, on the 20th Anniversary of the launch of CREST, the first in a series of research reports based on this research – ‘CREST Revealed: From Paper to Automation – Streamlining UK Securities Settlement’ is published.

This report covers the period from 1993 when the project was initiated, to its launch in 1996, and considers the environment that prompted its instigation. The report looks at the massive cooperation of Government, industry and a range of different service providers that all came together, under the central control of the CREST project team. It proposes five reasons why the CREST project was successful and examines why the CREST system continues to be at the heart of UK settlement, 20 years on.

Gary Wright, CEO of B.I.S.S. Research, who instigated the research project said:

 We started this project just over a year ago, with the objective of filling the knowledge gap about CREST, as very little has been published about this landmark project. It seemed very fitting that with the 20th Anniversary year upon us, we should document this historic project before all data was lost, and see what could be learnt from its success. One has to remember that in 1993, the financial services industry was in crisis, with the economy failing and the UK withdrawal from ERM. Technical modernisation of post-trade settlement was in its infancy, with many processes, paper based. Big Bang had created a huge surge in transactions and back offices were struggling, and sometime failing to cope. The introduction of the CREST settlement system changed everything. B.I.S.S. Research would like to thank the five sponsors that made this research possible: BT, CISI, Euroclear, the SWIFT Institute and Travers Smith. Their foresight and commitment to this project will leave a lasting legacy for students and future generations.

Dr Hermann Rapp, who leads the CREST research team along with Dr Cristiana Parisi,comments:

Complex technology projects can only be understood by looking not just at the technical characteristics, but also at the wider context in which the financial industry operates. The research enabled a unique look at a lighthouse achievement from several perspectives, and I would like to thank everyone who supported this research.

 Jon Vyse, Head of Post-Trade Services at BT, commented:

We were very pleased to sponsor this independent research, and we welcome its findings. Twenty years ago, replacing existing paper based settlement processes with a secure electronic matching system was considered to be pioneering. CREST’s enduring central role in today’s UK Financial Markets is testimony to the foundations and structure of the service that were established at the outset. As an accredited service partner to Euroclear, BT is proud to have served CREST members continuously since its launch by providing secure, managed messaging connectivity to CREST, and we look forward to extending our support for the service in the future.

Simon Culhane, Chartered FCSI and CISI Chief Executive said:

We are delighted to have been able to support this important research, which has highlighted just how well this critical piece of financial infrastructure was project managed.             

John Trundle, the CEO of Euroclear UK and Ireland said:

This research provides a timely reminder of how and why CREST succeeded twenty years ago. The principles and values that underpinned the launch of CREST in 1996 are still core to our business today, enabling us to settle transactions for the UK and Irish securities with an average value of £800bn every working day.

 Mark Evans, who is Travers Smith’s relationship partner for Euroclear UK & Ireland, commented:

It is impossible to exaggerate the significance of CREST’s successful launch and subsequent operation in maintaining London’s pre-eminence in the international securities markets. CREST was, and remains peerless, in its courageous and imaginative approach in responding to and resolving the complex business, operational and legal issues that affect the operation of our financial markets. I am delighted that Travers Smith was in a position to support and contribute to “CREST Revealed: From Paper to Automation’, which identifies important lessons shared for the benefit of all those who maintain an interest in the stability, efficiency and effectiveness of the UK’s financial market infrastructure.



 About B.I.S.S. Research

B.I.S.S. Research is an independent City think tank providing research, advisory services, training, benchmarking and analysis of industry issues, technology and services in the Global financial services industry. BISS also works with a number of leading universities and research institutes to facilitate research projects relevant to the financial markets. For more information, please visit: www.bissresearch.com or contact: Cathy Wright – Tel: + 44 (0)207 549 3564 – E: cathy.wright@localhost

About BT

BT’s purpose is to use the power of communications to make a better world. We are one of the world’s leading providers of communications services and solutions and our customers include the world’s largest banks, brokers, insurance companies, investment managers and exchanges throughout more than 180 countries. We deliver communications-based services that address the needs of organizations across the wholesale, corporate and retail banking, financial markets and payments sectors. We help them to increase their operational efficiency and agility as well as to improve customer service. The BT Radianz Cloud enables the largest, secure networked financial community in the world. Our services allow community members to carry out their business quickly and reliably, using integrated voice, data and video to communicate within and between thousands of institutions and to access applications from hundreds of providers internationally. We provide secure financial messaging services for the post-trade sector to more than 100 financial services companies globally, and have been accredited as a network service provider to CREST since its launch in 1996. For more information, visit: www.bt.com/financialservices or contact: Claire Connolly, Marketing Manager – Tel: +44 (0)1977 594 586 – E: claire.l.connolly@bt.com

About Euroclear

Euroclear UK & Ireland is the central securities depository (CSD) of the United Kingdom, Jersey, Guernsey and the Isle of Man for all domestic securities, and of Ireland for equities. It provides advanced, low-cost settlement facilities for a wide range of investment funds, corporate and government securities, and equities including those traded on the London Stock Exchange and Irish Stock Exchange. Euroclear UK & Ireland’s investment funds service uses the CREST system for the settlement, reconciliation, transfer and corporate action events processing of mutual funds held in the UK and Ireland.

The Euroclear group includes Euroclear Bank – which is rated AA+ by Fitch Ratings and AA by Standard & Poor’s – as well as Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland, Euroclear Sweden and Euroclear UK & Ireland. The Euroclear group settled the equivalent of EUR 675 trillion in securities transactions in 2015, representing 191 million domestic and cross-border transactions. By December 2015, the group held EUR 27.5 trillion in assets for clients. For more information, please visit: www.euroclear.com Or contact: Craig MacDonald, Corporate Communications & Media Relations Manager – Tel: +44 (0) 207 849 0315 – E: craig.macdonald@euroclear.com

About the SWIFT Institute

Launched in April 2012, the SWIFT Institute fosters independent research to extend the understanding of current practices and future needs across the financial industry. Managed by SWIFT, and working in close collaboration with academics from top international universities, the SWIFT Institute brings the financial industry and academia together to explore ideas and share knowledge on topics of global importance. The research covers various aspects of transaction banking, including the following areas: Payments, Clearing /Settlement, Cash Management, Trade Finance, Trust and Securities. For more information, please follow us on LinkedIn: SWIFT Institute or Twitter: SWIFTInstitute or visit www.swiftinstitute.org

About Travers Smith

Travers Smith is an international law firm, which acts for publicly-listed and private companies, financial institutions and private equity clients, as well as other business enterprises involved in large and complex UK and cross-border matters and transactions. The firm’s business comprises the following main practice areas: Commercial, IP & Technology, Competition, Corporate Finance and M&A, Dispute Resolution, Employee Incentives, Employment, Environment & Operational Regulatory, Finance & Restructuring, Financial Services & Markets, Investment Funds, Pensions, Private Equity, Real Estate, Regulatory Investigations and Tax. For more information, please visit: www.traverssmith.com Or contact: Sasha Radoja, Head of Communications – T: +44 (0) 20 7295 3228 – E: Sasha.Radoja@traverssmith.com

Gary Wright

Gary Wright

A leader in financial market innovation based on in depth knowledge of financial markets processes and specialising in data. Creator of business cases for new products and services in financial markets.