CREST
Encyclopedia
CREST is the Central Securities Depository
for the U.K.
, Republic of Ireland
, Isle of Man
and Jersey
equities and UK gilts
, named after its securities settlement system, CREST. The project was launched in 1993, following the Taurus fiasco, and the company was founded in 1996. CREST allows shareholders and bondholders to hold assets in a dematerialised, i.e. electronic form, rather than holding physical share certificates. CREST also serves a number of other important functions, such as assisting in the payments of dividends to shareholders.
It is also an "Electronic Trade Confirmation System" ("ETC") (using TRAX). When parties to a transaction make a deal, they both electronically confirm their sides of the transaction via file transfer. Both parties are required to submit confirmation details to CREST. In the event that transaction details do not match, CREST will highlight the issues and ensure that the problems are resolved as soon as is practicable. Given that stamp duty is only payable on physical share certificates, there is no stamp duty payable on shares settled via CREST. There is, however, stamp duty reserve tax. This is collected by CREST on behalf of Her Majesty's Revenue and Customs
. CREST was acquired by Euroclear
in August 2002
for German stocks and DTC for US stocks. CREST then issues a CDI to each holder of the security, which can then be transferred in CREST just like a UK equity. This is similar to the depositary receipt
s issued in other countries. However restrictions apply to CDIs. Many are not withdrawable or depositable into/out of Crest. This is because a CDI is an electronic reflection of the underlying security held in the domestic (country of origin) market.
How does it work?
To take the U.S as an example. The electronic settlement system in the U.S. is called DTC. If a shareholder holds electronic stock in the U.S. they will hold their securities electronically in DTC. In reality they will hold the securities via a custodian, so the custodian's nominee details will appear on the DTC register. This is known as holding stock in the 'domestic' market. Securities held this way can only be traded domestically i.e. in the market of the country of origin. If a shareholder wants to trade his securities outside of the U.S'domestic' market he can instruct his custodian to transfer his securities to the Crest account in DTC. Restrictions apply, only securities that have a U.K. quote can be transferred to Crest's DTC account. Crest is a member of DTC. So once the securities have been transferred out of the original custodian's nominee name and into Crest's account in DTC, the securities have now been 'cross bordered' into the U.K. market as CDIs. They can now be traded in the U.K market. Although not always withdrawn onto certificate or deposited into Crest.
Central Securities Depository
A Central Securities Depository is an organization holding securities either in certificated or uncertificated form, to enable book entry transfer of securities. In some cases these organizations also carry out centralized comparison, and transaction processing such as clearing and settlement of...
for the U.K.
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, Republic of Ireland
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
, Isle of Man
Isle of Man
The Isle of Man , otherwise known simply as Mann , is a self-governing British Crown Dependency, located in the Irish Sea between the islands of Great Britain and Ireland, within the British Isles. The head of state is Queen Elizabeth II, who holds the title of Lord of Mann. The Lord of Mann is...
and Jersey
Jersey
Jersey, officially the Bailiwick of Jersey is a British Crown Dependency off the coast of Normandy, France. As well as the island of Jersey itself, the bailiwick includes two groups of small islands that are no longer permanently inhabited, the Minquiers and Écréhous, and the Pierres de Lecq and...
equities and UK gilts
Gilts
Gilts are bonds issued by certain national governments. The term is of British origin, and originally referred to the debt securities issued by the Bank of England, which had a gilt edge. Hence, they are called gilt-edged securities, or gilts for short. The term is also sometimes used in Ireland...
, named after its securities settlement system, CREST. The project was launched in 1993, following the Taurus fiasco, and the company was founded in 1996. CREST allows shareholders and bondholders to hold assets in a dematerialised, i.e. electronic form, rather than holding physical share certificates. CREST also serves a number of other important functions, such as assisting in the payments of dividends to shareholders.
It is also an "Electronic Trade Confirmation System" ("ETC") (using TRAX). When parties to a transaction make a deal, they both electronically confirm their sides of the transaction via file transfer. Both parties are required to submit confirmation details to CREST. In the event that transaction details do not match, CREST will highlight the issues and ensure that the problems are resolved as soon as is practicable. Given that stamp duty is only payable on physical share certificates, there is no stamp duty payable on shares settled via CREST. There is, however, stamp duty reserve tax. This is collected by CREST on behalf of Her Majesty's Revenue and Customs
Her Majesty's Revenue and Customs
Her Majesty's Revenue and Customs is a non-ministerial department of the UK Government responsible for the collection of taxes and the payment of some forms of state support....
. CREST was acquired by Euroclear
Euroclear
Euroclear is a user owned and governed Brussels, Belgium based financial services company that specializes in the settlement of securities transactions as well as the safekeeping and asset servicing of these securities. It was founded in 1968 as part of J.P...
in August 2002
CREST Members
There are two classes of members on CREST: members and sponsored members. Members are usually pension funds, inter dealer brokers or other large financial institutions with significant resources. Sponsored members have the same rights and responsibilities as members. However, given that they do not have the financial or technical resources of the full members, they rely on their sponsoring member to interface with CREST.CREST Depository Interest (CDI)
CREST holds all international stocks in a pool in a local depository such as ClearstreamClearstream
Clearstream Banking S.A. is the clearing and settlement division of Deutsche Börse, based in Luxembourg and Frankfurt. Clearstream was created in January 2000 through the merger of Cedel International and Deutsche Börse Clearing...
for German stocks and DTC for US stocks. CREST then issues a CDI to each holder of the security, which can then be transferred in CREST just like a UK equity. This is similar to the depositary receipt
Depositary receipt
A depositary receipt is a negotiable financial instrument issued by a bank to represent a foreign company's publicly traded securities. The depositary receipt trades on a local stock exchange....
s issued in other countries. However restrictions apply to CDIs. Many are not withdrawable or depositable into/out of Crest. This is because a CDI is an electronic reflection of the underlying security held in the domestic (country of origin) market.
How does it work?
To take the U.S as an example. The electronic settlement system in the U.S. is called DTC. If a shareholder holds electronic stock in the U.S. they will hold their securities electronically in DTC. In reality they will hold the securities via a custodian, so the custodian's nominee details will appear on the DTC register. This is known as holding stock in the 'domestic' market. Securities held this way can only be traded domestically i.e. in the market of the country of origin. If a shareholder wants to trade his securities outside of the U.S'domestic' market he can instruct his custodian to transfer his securities to the Crest account in DTC. Restrictions apply, only securities that have a U.K. quote can be transferred to Crest's DTC account. Crest is a member of DTC. So once the securities have been transferred out of the original custodian's nominee name and into Crest's account in DTC, the securities have now been 'cross bordered' into the U.K. market as CDIs. They can now be traded in the U.K market. Although not always withdrawn onto certificate or deposited into Crest.
Law
- Uncertificated Securities Regulations 2001 (SI 2001/3755)
- Supplemented by CREST rules and conditions in the CREST Reference Manual, June 2009
External links
- CREST official site
- CREST : its recognition and approval, by Brian Smith, The Securities and Investments Board, 1996