The Bank of England (BoE), CHAPS Co and Euroclear UK & Ireland (Euroclear) have announced that, from summer 2016, the CHAPS and CREST settlement day will be extended by one hour and forty minutes to 18:00. The BoE expects direct participants in CHAPS and CREST to pass on the full benefits of the changes to customers. The BoE is enabling the changes by extending its own hours for operating its Real-Time Gross Settlement system. An implementation date in summer 2016 will be confirmed by the end of August 2015.

The BoE, CHAPS Co and Euroclear, have issued a joint paper, "Extending the CHAPS and CREST Settlement Day", to enable institutions to prepare for the change and to provide a basis for client communications. To view a copy, click here. The BoE also has a webpage on the changes – to view it, click here.

Click here for further background to the changes.

The changes

The new regime will see a number of changes to significant deadlines within the CHAPS and CREST systems, including:

  • the CREST deadline for both equity and gilt Delivery-versus-Payment transactions for settlement will be aligned to 14:55;
  • the market issuance deadline will be extended (in consultation with users) to around 15:00 – this is to improve the flexibility of corporate fund-raisers for same-day debt issuance;
  • within CREST, settlement of secured money market repo transactions via Delivery-by-Value will end at 17:30;
  • customer CHAPS payments will end at 17:40 (although customer deadlines set by direct members of CHAPS and CREST will be earlier); and
  • interbank CHAPS payments will end at 18:00.

Please click here for a table which summarises the key changes.
 
Timing

The extended CHAPS and CREST settlement day will be implemented in summer 2016.  The BoE, CHAPS Co and Euroclear have stated that a precise implementation date will be set, in discussion with participants, by the end of August 2015.

The BoE, CHAPS Co and Euroclear acknowledge that there are likely to be a number of cross-market areas that would benefit from wider discussion and coordination across a broad range of parties, including both service providers and end-users. They therefore intend to establish a representative forum for such areas to be discussed and have stated that further details will be communicated to participants in due course.

Extension to Sterling Monetary Framework facilities
 
In addition to the above changes, the BoE will be extending the availability of certain Sterling Monetary Framework facilities in line with the longer CHAPS and CREST settlement hours to enable settlement banks to manage their liquidity in the event of unexpected disruptions. Reserves accounts will be available for the movement of funds throughout the extended CHAPS and CREST settlement day. Operational Standing Facilities will continue to be available for transfers to/from reserves accounts for a short period after the new, later CHAPS end-of-day.

Implications
 
Institutions that provide services that settle transactions in CHAPS and/or CREST, such as banks, building societies and other financial market participants, and providers of supplementary back office services, will need to start their own preparations for implementation, including any consequential changes to customer services, to ensure readiness for summer 2016.

In preparing to deliver the benefits of the extended settlement day to the end-user, service providers will need to consider how they amend the deadlines set for their customers. The BoE, working with other UK financial authorities, has stated that it will monitor the delivery of benefits to end-users by their service providers.