| Activity | The origins of the Central Gilts Office go back to 1977/78, when high volumes of settlement business through the Jobbers' Counter clerical system provided by the Bank of England to the stockjobbers in gilts, stretched the system to the limit and gave rise to fears that it would be unable to cope if volumes kept on rising. Accordingly, a joint Committee was set up by the Bank and The Stock Exchange (the Joint Committee on Gilt-Edged Settlement), under the chairmanship pf Mr G D Burnett, a former director of National Westminster Bank, to "obtain agreement on measures necessary to ensure the reliable and effective settlement of gilt-edged and related securities through the next decade and beyond".
The Burnett Committee's main recommendations were that a computerised book-entry transfer system should be set up to hold records of balances on Members' book-entry stock accounts; that Members should communicate with the system by means of terminals linked to a central computer; and that transfers should take place on the basis of agreed transactions.
After due consideration of the recommendations, the Bank and The Stock Exchange agreed to set up a joint project to establish a system along the lines proposed. Overall strategic control was vested in the Joint Management Committee, chaired by Mr G M Nissen, comprising representatives from both parent bodies together with one from each of the different types of market participant. The JMC's first meeting was held at the Bank on 14 November 1980.
Work on the CGO Project commenced on 13 October 1980 at Stock Exchange premises in Wilson Street. Staff for the Project were seconded by both organisations. Inauguration was scheduled for October 1984, but the addition of several previously unrecognised requirements led to increases in the budget and caused the inauguration date to be delayed.
In April 1984 the Bank and the Stock Exchange agreed that to overcome the space problem at Wilson Street and as a means of releasing some of The Stock Exchange staff for redeployment on exclusive Stock Exchange developments, the Bank should make both premises and resources available for the Development Team. This was accepted at a JMC meeting held on 10 April 1984.
By early 1984 it had become known that an action by the Office of Fair Trading against The Stock Exchange had been resolved, and it was realised that this might pave the way for the eventual abolition of brokers' fixed minimum commissions. As 1984 unfolded it became clear that the OFT's decision would lead to a new market structure for gilts which would have a profound effect on the CGO Project. A paper put to the JMC in September 1984 suggested that the earliest possible date by which the CGO service could be available for the new market structure was 1 September 1986.
A few days later, on 4 October 1984, the JMC agreed that the Project should henceforth be taken forward in discrete phases and this was announced shortly afterwards. The target for the first phase was to implement a system containing minimum basic facilities for on-line stock delivery and enquiry for the core members of the gilt-edged market by 1 January 1986. This was achieved, as was Phase 2, which provided an assured payments system and made the CGO Service available to all new market participants to coincide with Big Bang on 27 October 1986.
The CGO Development Committee was created in February 1987 to plan for further development of the CGO. It included representation from the members of the CGO, including the Gilt-Edged Market Makers Association (GEMMA), the Stock Exchange Money Brokers' Committee (SEMBC), the Inter-Dealer Brokers' Association (IDBA), the London Discount Market Association (LDMA), the London Stock Exchange (LSE) and the settlement banks. The JMC was wound up just before Christmas 1992. With the demise of the JMC, it was decided to transform the CGO Development Committee into a CGO User Liaison Group. Its remit was 'to advise the Bank of England on the provision and development of all aspects of the CGO Service on a continuing basis'. Members of the Group included APACS, GEMMA, IDBA, LDMA, LSE , Money Brokers' Association (MBA) and the broker dealers.
The Bank announced in November 1988 its intention to develop a computerised settlement system for the sterling money markets to be known as Central Moneymarkets Office (CMO). This was inaugurated in October 1990.
In November 1994 the Bank's Executive Committee (EXCO) agreed that to provide settlement for the future gilt market, the CGO software, which was then 8 years old, should be rewritten, and that this should be done by 'cloning' the CREST system.
In the late 1990s it was decided that the CGO and CMO should be merged. Ownership of both systems was transferred to CRESTCo in 1999 and responsibility for operation of the CGO moved away from the Bank in July 2000. CRESTCo has been owned and operated by Euroclear since 2002. |
| Source | 13A75/1 - Central Gilts Office (CGO): Joint Management Committee, 1 Jan 1991 - 28 Jul 1994 (From a souvenir menu for a luncheon to mark the winding up of the JMC, 22 Jun 1993)
C161/1 - Central Gilts Office (CGO): Joint Committee on Gilt-Edged Settlements, 17 Aug 1977 - 10 Apr 1979
14A10 - Central Gilts Office (CGO) General Policy, 1 Jan 1981 - 31 Oct 1996
14A35/1 - Central Gilts Office (CGO) Mark II Project, 3 Jan 1995 - 18 Aug 1995 |