Travers, Freshfields and CC land work on LSE overhaul

Travers Smith Braith-waite, Freshfields Bruckhaus Derringer and Clifford Chance have advised CRESTCo, the London Stock Exchange (LSE) and the London Clearing House on a revolutionary trade settlement system provided for the LSE by CRESTCo.
The new system, which took effect on 1 July, will allow traders on the London equities market to settle trades with much less stock and cash liquidity. It will primarily benefit investment banks and larger brokers.
Travers has represented CRESTCo since the organisation was formed in 1995 and is doing ongoing work for it. CRESTCo operates as a mutual, with the Bank of England and large institutional users of the LSE as the main shareholders.
The appointment followed work Travers did on the LSE's Taurus system, an earlier unsuccessful incarnation of CRESTCo.
Travers has a three-partner team in the financial services and markets department, which works for CRESTCo. Jane Tuckley and Margaret Chamberlain are doing some work for the organisation, but Mark Evans led the trade processing service reforms. Evans said: “Because the IT and functionality are in our client CRESTCo, this put the onus on us as legal advisers.”
Travers advised alongside CRESTCo's in-house legal team, led by head of legal affairs Alastair FitzSimons and in-houser Bijal Thakrar. The London Clearing House was advised by Lynn Johansen of Clifford Chance and an in-house team led by Susan Ward. The LSE was advised by an in-house team led by Natasha George and Freshfields partner Michael Raffan.
Travers was involved with a drawn-out market consultation prior to implementing the changes. The two biggest differences post-1 July are on settlement netting and what CRESTCo calls “direct input services”, which allows an automatic electronic settlement instruction.
Traders will now have the option of settling their transactions net, whereas previously they had to settle each trade made on a gross basis, which required a high level of stock and cash liquidity. Under the optional direct input services system, trades can be settled automatically, which reduces the risk of failure where there is a mismatch in settlement instructions.
Evans claimed: “The UK is now at the forefront of settlement systems.” While other exchanges, including Euronext, have some of the functionality of CRESTCo, London's main European rival in Frankfurt does not yet have a comparable system. Fifteen CRESTCo members have joined the netting service and a further 10 will join in September.