Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 1

Securities Systems* have a primary responsibility to their users** and other stakeholders. They must provide effective low cost processing. Services should be priced equitably.

* Securities Systems = depositories, settlement and clearing systems
** Users = customers of the securities system, and all other parties to whom the securities system owes a duty of care

1.	Is the board that governs the depository answerable to its users?	Yes. The board of CRESTCo (the cash markets' settlement system) is drawn from market users and is structured so as to be representative of all market stakeholders. An external body, which is composed of the most senior people in the City of London, monitors this balance of interests.
2.	Does any single organisation, or sector (e.g. brokers, custodians, Stock Exchange) have a large voting position at the board of the depository?	There is a maximum share holding permitted in the CREST system for any Group (10% of the issued shares) and there is a re-balancing of shares at least once every three years. In addition, the articles of association of CRESTCo require that no market sector should have a controlling interest.
3.	Is there cross subsidisation of products (e.g. international services subsidised by local ones or transaction costs subsidised by asset servicing charges)?	The primary source of income of the CREST system is derived from transaction charges. There is no ad valorem charge for domestic (UK, Irish, Channel Islands) securities. Charge levels are geared to transaction volume with discounts for scale. CREST also obtains material income from acting as agent to HM Treasury for the collection of stamp duty and through fines levied on users for late matching and late settlement. CREST charges for international securities are not based on cost recovery at present low volumes and are currently subsidised. However, the current volume of such transactions is low and management does project that the business will cover direct costs and contribute to overheads.
4.	What process is in place at the depository to ensure that it meets the needs of all its stakeholders (e.g. institutions, broker dealers, retail investors, issuers)?	The board structure achieves this in part by use of board committees (audit, strategy, settlement discipline, staff, project and gilt edge/money market) and also user committees (e.g. professional investor, retail etc). The board meets monthly and is highly active. Non-executive directors chair all the board committees while the audit, strategy, market discipline and gilt edged/money market board committees have external representatives as full members. The user committees are drawn from users as well as registrars, listed companies and official bodies.
5.	What is the communications strategy of the depository to its stakeholders and how is this run?	There is an annual general meeting open to all shareholders in accordance with UK corporate law. CREST issues a monthly full and frank newsletter. CREST has an up-to-date and very comprehensive website, containing all its many publications and bulletins. CREST staff regularly call on customers and other stakeholders to give and receive briefing. CREST has a five-person customer relations department. The depository publishes an annual report detailing its actions and plans, as well as its financials. All major events are preceded by a publication seeking input from the market. All events are broadcast to users through the CREST network. Operations and corporate actions bulletins containing operational information are issued by fax and email, weekly or more frequently as required, and posted on CREST's website.