News Release
Gilt-Edged Market: Timetable for Strips and Upgrade of CGO in 1997
03 December 96
The Central Gilts Office (CGO), which provides the electronic settlement system for gilts, has today issued further details of the upgrade of its service planned for 1997.
It is planned to introduce the upgraded service on 26 August 1997, with switch-over from the existing service taking place over the August bank holiday weekend (23-25 August). Initially, the aim had been to introduce the new service in the spring of 1997, but an extension in the timetable is sensible to enable market firms to concentrate in the immediate period ahead on the current transition of equities settlement from Talisman to CREST.
It remains the firm intention of both CGO and CREST to keep open the option of possible consolidation of the two systems in the future once both systems are fully up and running.
With that intention in mind, CGO and CREST have now agreed in principle the arrangements for both services to utilise the same networks (Syntegra and SWIFT). This represents a significant and concrete step forward in convergent development of the two systems.
To the same end, as already announced, the CGO upgrade will utilise CREST software. CGO and CREST have in place close working relations to ensure mutual co-operation in further development of this software. CREST are sharing with CGO details of enhancements it introduces in the light of experience with the transition from Talisman. CGO, equally, will share with CREST the results of the full testing programme it will run to tune the software for use in gilts settlement. This testing and tuning will take account, for example, of the shorter settlement cycle for gilts (T+1, as compared with T+5 for equities) and the fact that switch-over to the upgraded CGO service will be immediate, as compared with the progressive transition of equity settlement from Talisman to CREST.
As already announced, facilities are to be introduced for stripping (and reconstitution) of gilts once the upgraded CGO service has begun operating. The extension in the CGO timetable set out above means that stripping facilities are now likely to be introduced some months later than originally intended. The aim is to introduce stripping facilities a month or so after the upgraded service is introduced. Regardless of the date for the start of the strips market, gilts which are to be strippable will pay gross from 7 June 1997.
Notes to Editors
The Central Gilts Office, the CGO, is the electronic settlement system for trades in gilts, operated by the Bank of England. The present system was introduced in 1986 as part of "Big Bang". The decision to upgrade it utilising the CREST software was announced in November 1995.
CREST is the electronic settlement system for settling trades in UK and Irish securities. Inaugurated in July 1996, stocks are being transitioned into it from Talisman over a period of months expected to last until April 1997.
Stripping is the process of separating a standard coupon bond into its constituent interest and principal payments, so that they can be separately held or traded as two coupon instruments.
The Bank of England and CRESTCo announced arrangements for cooperation in November 1995.
