CREST: Electronic Share Settlement System

CREST is an electronic share settlement system created by the Bank of England for the securities industry, which commenced operation in 1996. It was designed to modernize the process of transferring ownership of shares, eliminating the need for paper certificates and allowing for instantaneous settlement of purchases and sales on the due date. In 2002, CREST was fully acquired by Euroclear, a leading provider of post-trade services.

Types

• Electronic Share Registration: All shares within CREST are registered electronically, obviating the need for physical share certificates.
• Instantaneous Settlement: Transactions are settled instantaneously on the due date, minimizing delays and associated risks.
• Electronic Dividend Payment: Dividends are paid directly to shareholders’ bank accounts, enhancing convenience.

Operational Mechanism

CREST operates by maintaining a detailed electronic register of shareholders, which serves as proof of ownership. Here’s a simplified flow:

Importance

CREST has brought significant improvements to the securities industry, including:

• Efficiency: Reduces the time and administrative burden associated with paper-based settlements.
• Security: Electronic records reduce the risk of fraud and errors.
• Cost-Effectiveness: Minimizes costs related to physical certificate management and handling.

Applicability

CREST is applicable to:

• Investors: Facilitates seamless purchase, sale, and ownership transfer of securities.
• Companies: Simplifies the process of maintaining shareholder registers.
• Banks and Brokers: Provides a more efficient system for processing transactions.

Related Terms

• Euroclear: The financial services company that owns CREST since 2002, specializing in settlement and related services.
• Electronic Settlement: The process of finalizing securities transactions electronically, as opposed to physical delivery of share certificates.

FAQs