CREST – A Beginners Guide

Most markets around the globe have a Central Securities Depositary (CSD). The CSD will allow listed issuers to inject their stock into the market so that when it’s traded on a stock market, sales and purchases can be settled electronically.

In the UK & Channel Islands, the CSD is known as CREST and operated by Euroclear UK and International. Issuers must use an approved participant, such as Computershare, to access CREST. CREST is important as it ensures that listed stock can be settled electronically (in a dematerialised form).

When stock is inserted into CREST this creates a register of two parts:

• Operator Record (Primary Record) – CREST maintains uncertificated part of the register
• Issuer Record – Computershare maintains the certificated part of the register & reflects the Operator Record

What are RURs?

Computershare receives around 130,000 CREST transactions each day (known as RURs – Register Update Records). To register these in a timely manner, we send electronic messages to CREST every 15 minutes from 6am to request the RUR data. We’re also required to send CREST acknowledgements from 8am for the RURs that we registered - including those created overnight.

How is stock held in CREST?

Stock held in CREST is held in one of three ways

1. Direct Members – the members name will appear on the Issuers register and they can have more than one account to allow designations to be applied. Also known as Institutional Investors.
2. Sponsored Members – generally private investors and their names will appear on the Issuers register. A direct member must act as the sponsor to provide a link to CREST.
3. Custodian – shareholders will appoint a nominee who is a direct member, and the nominee will hold the stock on behalf of the shareholder. Also known as Intermediaries.

Key points to remember:

• Each CREST member has a Participant ID and at least one Member Account ID.
• Stock of different companies are held within the member’s account and allocated to separate securities accounts.

What instructions go into CREST?

Users of the CREST system input instructions and receive information via one of two electronic networks — SWIFT or BT. There are two key instructions we see on a regular basis when working through a corporate action such as an Offer for Subscription, a Rights Issue or an IPO sell down:

• Delivery versus Payment (DvP) – This is the settlement of a transfer which results in a movement of an asset from A to B and the movement of cash from B to A simultaneously.
• Free of Payment (FoP) – This is for transfers that do not involve a cash purchase.

Frequent mistakes

1. When issuers request a registrar to issue new stock into CREST, it’s imperative that the information provided is correct to avoid delays in the allotment.
2. Often registrars are given the ultimate investor reference number for their broker/custodian which isn’t a registered CREST member (They will have a CREST participation ID which is usually 4-5 characters).
3. A member will need to be informed by the issuer or ultimate investor that the stock will be delivered, otherwise they may not accept it and Computershare may have to recall it. Recalling stock from a CREST member can be very challenging and time costly.

Conclusion

Computershare’s friendly and experienced team are always willing to help with CREST based enquires, different types of transactions or answer any further questions.

We also run regular workshops on other similar topics, so please reach out if you would like more information.