The UK's moneymarket participants are gearing up for the introduction of paperless trading on Monday, when depository Crest takes over instrument issuance and processing from the Central Moneymarkets Office.
The shift to Crest follows several years of preparatory work, extensive trialling and the passage of the necessary legislative amendments. The migration process, which begins on 15 September and is scheduled to end on 13 October, will transfer UK money market instrument issuance and processing to Crest and allow the closure of the CMO service, marking an end to a centuries-old tradition of physical paper delivery between City institutions.
Hugh Simpson, chief executive of CrestCo, states: "Issuing, settling and holding money market instruments alongside gilts, equities and other securities that are eligible in Crest provides an estimated cost saving of about 85% to the market."
That equates to a saving of some £4 million a year to the market, which employs approximately 8000 people in London.
Liquidity is also likely to benefit, says Simpson, as non-CMO members gain access to these securities in Crest. In addition, due to the multi-currency capabilities of the Crest system, it will be possible to issue money market securities in currencies other than pound sterling and euro, for example US-dollar denominated certificates of deposit.
Indeed, the switch to Crest holds out the prospect for retail investor participation as brokerage houses develop US-style money market accounts as an alternative to bank current accounts.