What Is CREST? Definition, Function in Trading Stocks, and Uses

What Is CREST?

Certificateless Registry for Electronic Share Transfer (CREST) is the central securities depository for markets in the United Kingdom and for Irish stocks. CREST is named after the CrestCo corporation, which has been owned and operated by Euroclear since 2002. It is the operator of an electronic settlement system that is used to settle a broad spectrum of international securities, and can also hold stock certificates on the behalf of its customers.

Understanding CREST

Euroclear was established in the 1960s in response to the emerging Eurobond market. The company went through decades of growth and expansion, as well as several mergers, which included some central securities depositories (CSDs) such as Sicovam SA—the CSD of France.

The CREST project was launched in 1993. Three years later, the subsequent parent company, CrestCo, was founded. Euroclear merged with CrestCo in 2002 and took operating control of the company. The new name for the merged companies became Euroclear UK & Ireland.

CREST is an acronym for Certificateless Registry for Electronic Share Transfer. It is accessed by a number of different professionals ranging from investment firms, brokers, and international banks—all of whom allow retail investors to hold securities electronically.

CREST makes it possible for bondholders and shareholders to keep assets in electronic form instead of holding physical share certificates. The system also assists in making dividend payments to shareholders and executes other important functions such as putting into effect corporate actions like rights issues.

CREST also acts as an electronic trade confirmation (ETC) system through the use of Trax. When two or more parties in a transaction agree upon a deal, they confirm their sides of the transaction through an electronic transfer. All parties involved are required to submit confirmation of all transaction details to CREST. If details of the transaction are not the same for each party, CREST indicates all issues and notifies parties of discrepancies. This aspect of the CREST system allows for a speedy resolution and faster processing of the transaction.

Because CREST maintains a clearing system and holds securities, it can offer same-day clearing for securities transactions. The company’s most important offering to investors is the fast transfer of the securities titles that it handles.

Special Considerations

Registrars who are CREST members hold stocks of British companies, while exchange-traded funds (ETFs) and Irish securities are settled through CREST members directly. Members are divided into two separate classes on the CREST system: Full and sponsored. Full members are usually inter-deal brokers, pension funds, and other large financial institutions that have substantial resources.

Sponsored members, on the other hand, are given all the same rights and the same responsibilities as members. But because sponsored members generally have far fewer technical and financial resources than full members, they are reliant upon their sponsoring members to interface with the CREST system.

CREST helps connect markets in the United Kingdom and Ireland with others internationally. Retail and private investors are able to open accounts in their own name and are given access to CREST indirectly through their broker or bank.