From Paper-based to Electronic Securities Posttrading: Financial Automation and the Case of CREST

Over recent decades, securities post-trading has seen a radical change from paper-based to electronic procedures. Technological advances have facilitated digitisation as a global trend. While in the investment industry technology has also been a key driver for financial automation since the late 1950s, a range of additional driving forces can be identified. In the 1980s, deregulation in the finance sector and privatisation led to millions of new shareholders and increasing transaction numbers in securities trading. The subsequent settlement crisis called for new solutions to transform centuries old business practices in the investment industry. This study focuses on CREST, a leading settlement infrastructure that facilitated the leap from paper-based to electronic post-trading in London. In 1993 it started as a project of the Bank of England, and today, CREST is operated by Euroclear United Kingdom & Ireland (EUI). Research objectives of this study are to investigate the industry context, how the CREST project was managed and introduced at a time of crisis, how the technology was designed, and its impact on financial markets and today’s UK and European infrastructure. Twenty individual interviews and one group interview with key actors were conducted, complemented by document analysis and secondary data. The study has generated rich data and confirms that CREST achieved the dematerialisation of securities settlement through a joint industry effort effectively reducing settlement time, risk and cost. A framework to study different perspectives on CREST is presented, and suggestions for a programme for future research are given.