Press releases 1999

23 November 1999

UK EQUITIES: PROPOSAL FOR A SHORTER SETTLEMENT CYCLE

 

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.