UK depository Crest has published a consultation paper on the implementation of settlement netting for equity trading in London.
London Clearing House (LCH), in conjunction with CrestCo, intends to implement settlement netting through the LCH EquityClear service in early 2002. The paper, 'Settlement Netting and Post-Trade Processing', sets out the features that will support the new model.
The first phase of the service for trades executed on the London Stock Exchange’s Sets platform, will go live on 26 February 2001 in line with the constriction of the settlement cycle to T+3. In this phase, LCH will settle each trade with market participants on an "as dealt" or "gross" basis.
Crest says settlement netting will eventually be extended to European, US and Canadian securities traded in Europe, enhance post-trade services such as corporate actions, stamp duty accounting and regulatory reporting, and allow for bilateral netting.
Iain Saville, the chief executive of CrestCo says: "The netting of equity trades is a new concept for London, and indeed European markets. But it is an essential part of delivering a low cost, highly efficient securities market infrastructure. Netting should enable the equity markets to handle sudden surges in volume with ease."
David Hardy, chief executive of LCH describes the introduction of settlement netting as "the most important deliverable to equity market users".
"Completion of the consultation process will enable LCH and Crest to publish the definitive detailed netting model in the second quarter of this year, and allow us to implement the service early next year," he adds.