News Release
Merger of CGO, CMO and CREST
17 September 1998
The Bank of England and CRESTCo Limited have reached agreement for CRESTCo to assume responsibility for the settlement of transactions in gilts and money market instruments.
Subject to implementation of the necessary statutory and regulatory changes and the conclusion of a number of new contractual arrangements, the Bank and CRESTCo intend that CRESTCo should assume responsibility for the Central Gilts Office (CGO) and the Central Money Markets Office (CMO) services in the second quarter of 1999.
When CRESTCo assumes responsibility, both services will initially continue to be operated by the Bank under CRESTCo’s management, from the Bank’s premises and using the Bank’s equipment. CRESTCo will relocate the CMO service to its own premises and equipment in the third quarter of 1999. The CGO service will remain in the Bank until gilts settlement is absorbed into the CREST system itself, which CRESTCo proposes should take place in the second quarter of 2000.
In order to reflect the various additional interests which these changes will involve, CRESTCo has, subject to necessary approvals, invited both the Bank of England and the Debt Management Office to nominate candidates to join CRESTCo’s Board of Directors.
The Bank of England’s recent Securities Settlement Priorities Review revealed a clear consensus amongst market participants to merge gilt and equity settlement within a single system, and for merger to take a high priority amongst the range of possible developments to the UK settlement infrastructure.
It also revealed strong support for full integration of money market instruments into gilt/equity settlement arrangements. Integration will need to take into account the distinctive legal and operational characteristics of money market instruments, many of which trade on a non-fungible basis. In order to ensure that any future development is in the interests of all money market participants, the Bank intends to conduct a review, involving CRESTCo and market participants, of the structure of money market instruments, and the implications for both trading and settlement arrangements, in the next year.
These developments, and others discussed in the Securities Settlement Priorities Review, will enable London to continue to offer the most efficient and effective securities settlement infrastructure and help to ensure that London retains its position as one of the world’s key financial centres.
The Report on the Securities Settlement Priorities Review is also published today.
Press enquiries:
Bank of England 020 7601 4411-5
CRESTCo Limited 020 7459 3034/3000
Notes for Editors
The CREST system settles UK and Irish corporate securities. It was inaugurated in 1996 and is operated by CRESTCo Limited.
The Central Gilts Office was established in 1986 by the Bank of England and the London Stock Exchange for the settlement of gilts and certain non-British government debt instruments. It is operated by the Bank of England. In November 1997, the service was upgraded based on the CREST software.
The Central Money Markets Office provides a facility for the immobilisation and transfer of sterling money market instruments. It was established in 1990. From January 1999, a parallel facility will operate for euro money market instruments. Under the agreement between the Bank of England and CRESTCo, the Bank of England will continue to provide the depository service for the immobilisation of money market instruments.
Transfer of the CGO service to CRESTCo will require amendment to the Uncertificated Securities Regulations 1995 and the Stock Transfer Act 1982. A consultative paper will be issued by HM Treasury later this year.
The Securities Settlement Priorities Review was undertaken during the first half of this year to seek the views of market participants about the future development of securities settlement systems in the UK. The results of the review are published today in a report which is available from the Bank of England.
