10 November 2016

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

Learning from a ‘back-office revolution’ that transformed post-trade processing.

The paper, “From Paper-based to Electronic Securities Post-trading: Financial Automation and the case of CREST”, focuses on the transformation of UK clearing and settlement processes in the 1990’s. The report examines how CREST, a UK-based central securities depository, facilitated the leap from paper-based to electronic post-trading in London. The paper also proposes a framework for determining the success of distributed ledger technology and other future post-trading strategies.

This research examines the origins of CREST, with its genesis arising out of the ‘settlement crisis’ during the stock market crash of 1987, when paper-based processes used at the London Stock Exchange were not able to keep pace. According to many interviews, the creation of CREST and the automation of securities settlement drove forward a ‘back-office revolution’. The resulting outcomes yielded higher transaction volumes, leading to new financial products and more efficient post-trade processing in terms of cost and time.

by Christiana Parisi, Hermann Rapp

  • Copenhagen Business School