Crest Fails To Gain Full Confidence

LONDON - Crest, London's computerized share registration system, has won the confidence of the directors of the Bank of England-led group developing it, but has yet to win the full confidence of industry, settlement managers said.

After a series of software glitches that recently led to a huge backlog of unmatched trades, CrestCo executives on Monday convinced the board of CREST that problems have been resolved.

The computerized system to record ownership of shares will be fully operational by April, as originally planned.

"I'm sure it was a difficult decision for the board to make, but my personal view is that I thought a bit more breathing space was needed," said Mike Jones, technical services director at fund manager Capel Cure Myers.

The first leg of the transition to Crest from the London Stock Exchange's existing paper-based Talisman system was launched in July.

Since then, software and other problems caused slow processing times and a backlog of unmatched trades, forcing Crest to delay until early next year the transfer of 17 FTSE 100 stocks in order to sort out the problems.

John Taylor, settlement manager for stockbrokers Walker, Crips, Weddle, Beck, said he was concerned about Crest's ability to handle larger volumes as the transition progresses.

Plans call for Crest to settle 43 percent of the market volume by year end.

"As it is, we work until 10 at night inputting details," said Taylor. "It's not our software, it's the Crest system."

A spokesman for Crest said it is likely that more capacity will be added to the mainframe computer system over the next three to four months to cope with increased volumes. The cost will come to about 20,000 pounds per month, he said.

Meanwhile, the Securities and Investment Board and other regulators, which have been in contact with Crest's 243 users in the wake of recent software improvements, will continue to monitor the situation.

Jones said he has noticed software adjustments have cut processing time, but says he believes the industry would be better served by moving forward at a slower rate.

"There still are a number of fixes needed and there has been a steep learning curve through the industry. People still have to get to grips with how to use it," said Jones.

Smaller brokerage houses have had the biggest problems and have been most vocal about the need for slowing the transition period.

"I was disappointed that (the April deadline) wasn't delayed," said one settlement manager who asked not to be named. "Crest isn't working as it should. It's not a seamless process. They seem to think it will get better, but I don't know."

In announcing the board's decision, CRESTCo chief executive Iain Saville said, "We believe that both the market and Crest are now prepared for the increased volumes during 1997."

"It is in the entire market's interest that the transition period is completed as quickly as possible."

But settlement manager Stephen Pinner at retail brokerage Cater Deal Services said he took heart from CREST statement.

"It's a very difficult one to call, but (CREST) has gone public saying the problems have been resolved and they're on top of the game," Pinner said. "I don't think they'd say that if they hadn't done their homework. My reaction is that I'm rather pleased."

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