“Hard” infrastructure refers to the physical equipment, software and networks supporting those markets. See “Open Forum: Building real markets for the good of the people”, http://www.bankofengland.co.uk/ markets/Documents/openforum.pdf. 2  http://www.bankofengland.co.uk/publications/Pages/news/2016/071.aspx. 2  BIS central bankers’ speeches  independent CREST research project later in the day, which has reached very similar conclusions 3. Table 1 Key lessons for success from the crest project  All successful projects need a clear platform for change – and CREST had a burning one! The collapse of TAURUS on 11 March 1993, followed by the resignation of Peter Rawlings, the Chief Executive of the Stock Exchange, was front page news. The huge rancour, reputational damage and cost (estimated by the FT at £ all-in, in mid-1990s money) cast a pall over the UK financial system, already reeling from the failed attempts to defend  3  “From Paper to Automation – Streamlining UK Securities Settlement”, at http://www.globalservices.bt.com/ static/assets/pdf/products/financial_markets_settlenet/CREST-BISS-Industry-Report-final-for-publication.pdf. BIS central bankers’ speeches  3  sterling on “Black Wednesday” and the publication of the BCCI Report in 1992, and facing renewed competition from financial centres in continental Europe and elsewhere. Without TAURUS, the UK was left with what one leading fund manager gloomily described as a “Third World settlement system in a first-rank financial centre”. Equity settlement relied entirely on paper certificates, passing through an average of 25 pairs of hands for each trade, each time running the risk of getting lost, misfiled or stolen. Settlement occurred only once a fortnight, and on a fixed rather than a rolling timetable.
Unsurprisingly, a fifth of all trades failed to settle on time. If the case for change was clear, so too was the common purpose shown by the public authorities. As Pen Kent, the Bank’s Executive Director in charge of CREST said at the time, “TAURUS gave the Bank the legitimacy to step in and get on with the job: it needed a market failure to get everyone pointed in the right direction.” The Bank of England, called upon privately to act by the Chairman of the Stock Exchange, had two main goals: first, to reduce the material risks to financial stability posed by such an extended and uncertain settlement process; and, second, to ensure the UK had an efficient and internationally competitive market infrastructure. There is no doubt that the second of these goals weighed particularly heavily with the Bank’s Governors of the day. Not everyone agreed that the Bank should become closely involved, worrying that it could be a costly and reputationally risky distraction from the post-ERM project of repositioning the Bank as an organisation capable of taking on independent responsibility for setting monetary policy for the country as a whole. But the majority view won out, bolstered by the active support of the UK Government, notably HM Treasury, which took responsibility for ensuring that the complex and extensive legislative changes required were delivered in a timely and effective way.