DEFINITION of CREST
CREST is the central securities depository for markets in the United Kingdom and for Irish stocks. CREST is the operator of an electronic settlement system that is used to settle a broad spectrum of international securities, and can also hold stock certificates on the behalf of its customers. CREST is an acronym for Certificateless Registry for Electronic Share Transfer, named after the CrestCo corporation, which has been owned and operated by Euroclear since 2002.
BREAKING DOWN CREST
Because CREST maintains a clearing system and holds securities, it can offer same-day clearing for securities transactions. The company’s most important offering to investors is the fast transfer of the securities titles that it handles.
How It Works
CREST makes it possible for bondholders and shareholders to keep assets in electronic form instead of holding physical share certificates. The system also assists in making dividend payments to shareholders.
CREST is also an electronic trade confirmation (ETC) system through the use of Trax. When two or more parties in a transaction agree upon a deal, they confirm their sides of the transaction through an electronic transfer. All parties involved are required to submit confirmation of all transaction details to CREST. If details of the transaction are not the same for each party, CREST indicates all issues and notifies parties of discrepancies. This aspect of the CREST system allows for a speedy resolution and faster processing of the transaction.
Two classes of members exist on the CREST system: full and sponsored. Full members are usually inter-deal brokers, pension funds and other large financial institutions that have substantial resources. Sponsored members are given all the same rights, as well as the same responsibilities, as members. However, because sponsored members generally have far fewer technical and financial resources than full members, they are reliant upon their sponsoring members to interface with the CREST system.
History and Mergers
The CREST project was launched in 1993, and the subsequent parent company, CrestCo Ltd., was founded in 1996.
Euroclear was established in the 1960s, responding to the emerging Eurobond market at that time. The company went through decades of growth and expansion, as well as several mergers, which included some central securities depositories (CSDs) such as Sicovam SA (the CSD of France). Euroclear merged with CrestCo in 2002 and took operating control of the company. The new name for the merged companies became Euroclear UK & Ireland.