The SWIFT Institute has released a new academic paper focussing on the transformation of UK clearing and settlement processes in the 1990’s. The report, entitled, “From Paper-based to Electronic Securities Post-trading: Financial Automation and the case of CREST” is written by Dr Hermann Rapp and Dr Cristiana Parisi and 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.

The CREST research project captured first-hand information through documents and reports by contemporary witnesses regarding the ultimate success of CREST’s functionality in securities settlement. The research focuses primarily on how the CREST project was managed and introduced at a time of crisis, how the technology was designed, and its impact on financial markets, including today’s UK and European market infrastructures.

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.

“During this time of unprecedented change within the financial industry, this working paper looks back and examines the steps taken 20 years ago when the industry was in a similar state of profound transformation,” says Peter Ware, Director of the SWIFT Institute.

“It is important that we take this moment to ensure the data of contemporary witnesses is not lost. We also need to examine the successful role CREST played within the financial landscape and pinpoint how we can take these lessons and use them to help map out the infrastructure of banking technology for the future.”