Newspaper article The Evening Standard (London, England)

Savings Prize in Exchange Merger

Newspaper article The Evening Standard (London, England)

Savings Prize in Exchange Merger

Article excerpt

Byline: ANTHONY HILTON

BACK in the 1980s when Sir Nicholas Goodison and Jeffrey Knight ran the Stock Exchange, it tried and failed miserably to buy the London Clearing House.

In the early 1990s, it tried to upgrade its Talisman computer with an all-singing, all-dancing electronic settlement system called Taurus.

When that also failed to work and had with much recrimination to be abandoned, a Stock Exchange greatly diminished in credibility in matters of technology was rescued by the intervention Bank of England.

It had just built an electronic settlement system for the gilts market so it put together a similar team and built Crest for the settlement of share purchases and sales - and pointedly excluded the Stock Exchange from a significant shareholding in Crestco because it did not trust it not to screw it up again.

Out of these disasters and failed initiatives came the horizontal model of clearing and settlement that still exists in London and where each stage in the system - trading, clearing and settlement - is in different hands. It was never planned that way but, looking at the wreckage, the orderly minds of the powers that be sought to rationalise what they had ended up with.

So they invented the horizontal model for no better reason than that it appeared to bring order out of chaos and made what they had been left with seem to be part of some grand and rational plan.

It was rather like Dunkirk - a disaster from which things were heroically salvaged but which, with the passing of the years, comes to be thought of as a triumph. The danger arises, however, when people forget the reality of how we got to where we are. It is this kind of muddled thinking that allows people to rubbish the Deutsche Borse bid for the London Stock Exchange on the grounds that the former actually owns its clearing and settlement business. …

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