News Release
UK Equities: Proposal for a Shorter Settlement Cycle
23 November 1999
The Bank of England, the London Stock Exchange and CREST today (Tuesday 23 November) jointly announced proposals for the UK's equity and corporate debt markets to move from T+5 to T+3 settlement - starting in February 2001.
The three organisations have been reviewing the case for a new standard settlement period in both the UK equity and corporate debt markets and the optimal time at which to introduce such a change. This follows the Exchange's consultation with market participants in April this year when nearly 80 per cent of respondents favoured a move to a shorter settlement period.
The Bank, the Exchange and CREST believe that a move to T+3 in early 2001 is a feasible objective and would not require major changes in market infrastructure. Shortening the settlement cycle will bring significant reductions in counterparty risk in the UK equity market and a move to T+1 remains a longer-term objective.
Commenting on the proposed change, Howard Davies, Chairman of the Financial Services Authority, said: "I very much welcome this initiative as a further useful enhancement of London's market practice."
Market participants have been invited to comment on the proposals by 17 December. It is expected that the plans will be confirmed in January 2000.
Note to Editors
T+5 is the period in days that elapses before share settlement is due or paid. It stands for transaction day plus five business days. This is the standard period for settlement in the UK market which takes place on a rolling basis.
Press Contacts:
For more information, please contact:
Sally Reid (Bank of England) 0171 601 4411
Andy Muncer (London Stock Exchange) 0171 797 3465
Paul Symons (Crest) 0171 849 0034
A copy of the publication 'Reducing the Standard Settlement Period for Equities and Corporate Debt' can be found on CRESTCo's website.
