Following years of unglamorous dealings in streets and coffee shops, the London Stock Exchange was officially born in 1881 as an approved, regulated exchange (Head, 2001). Today it is at the heart of global financial markets and is home to some of the biggest companies in the world.
There have been many historical moments along the Stock Exchange’s timeline, each helping it on its way to worldwide prominence. One of the most significant of these was the “Big Bang” on 27th October 1986 (londonstockexchange.com).
On this date of deregulation, the London Stock Exchange became a private limited company and the abolition of fixed commission charges precipitated a complete alteration in the structure of the market.
In 1987 London's antiquated paper-driven procedures almost collapsed under the sheer weight of trading volumes resulting from the unusually buoyant market (Drummond, 1998). These procedures simply had to advance in order to compete with other financial markets worldwide.
Taurus was a computer program that was intended to provide the Stock Exchange with a "state of the art, all conquering" automated system of electronic transmission. This would enable the securities industry to remove paper from the system (in the form of physical share certificates). However, the UK securities industry is very diverse and everyone in the market wanted something different. No one was prepared to compromise so the only solution available to the Stock Exchange was to combine all the various Taurus models (17 in all) into one immensely complex hybrid (Drummond, 1998).
Unsurprisingly, it was an extortionate flop costing £75million. In March 2003, Taurus was abandoned by the London Stock Exchange (euroclear.co.uk).
In July of the same year, work began on a phased approach to the cost effective improvement of UK equity settlement (euroclear.co.uk). It was envisaged that the new system, called Crest, would bring London into line with big financial centres such as New York in having a modern method of settlement.
Crest, unlike its predecessor, has been a resounding success. In fact CrestCo (the company that owns and operates the Crest system and now known as Euroclear) was awarded one of the three trophies in the 1997 British Computer Society Awards, the most prestigious form of acknowledge of excellence in the British Computer Industry (bcs.org).
Simply put, Taurus appears to have been too complex and ambitious a system, overcomplicated further by the hundreds of staff that were involved in its development (Head, 2001). Crest on the other hand was co-ordinated by a core, high level design team of 4 or 5 who kept an overview of the entire project (Currie, 1997). This relatively simplistic (in comparison so that adopted by Taurus) approach appears to have been the secret behind the success of Crest. In trying to meet all the demands of all the transactions, an uncontrollable monster had been created in the form of Taurus. Learning from this, Crest catered only for the 10-15% of business functions that made up 85-90% of transactions. “The market went wild” at such a minimalist system (Head, 2001).
Furthermore, Taurus dictated that all member firms would have to use the system and there was no option to retain share certificates. As a result of this legal problems arose. Crest however, did not force shareholders to relinquish certificates, thus avoiding legal problems and making the system politically acceptable to its institutions.
Crest was also designed after Taurus and therefore benefited from greater technical advances and maturity. From the outset, Crest had a better chance of success. Similarly, many of the software developers who worked on Crest had previously been involved in the design and implementation of Taurus (Currie, 1997). As a result those workers had gained experience in the field and thus started from a position of strength. As had the Bank of England, who set up a company to develop Crest, in order to avoid the inherent organisational politics and difficulties which beset Taurus (unknown, 1993).
When designing Crest, supplier contracts were negotiated at a fixed price whereas those for Taurus were more fluid (Currie, 1997). This prevented suppliers prolonging jobs in order to maximise their own profit and gave an incentive to deliver their product on time and on budget. Had Taurus put similar contracts in place, it may not have cost the £75million that it did. Whilst this can go some way to explaining why Taurus was ten times over budget, it is the reasons outlined above which made Taurus such an infamous failure.
Sources Used:
Articles
Currie, W “Computerising the Stock Exchange: A Comparison of Two Information Systems” Blackwell Publishers Ltd, 1997
Drummond, H “Riding a Tiger: Some lessons of Taurus” Management Decision, 1998, Volume 36 Issue 3
Duffy, M “London’s Embarrassing Mistake” Wall Street and Technology, 1993, Volume 10 Issue 10
Head, C. H “Taurus and Crest, Failure and Success in Technology Project Management”, Henley Management College, 2001
Unknown “Crest: Little Taurus” www.practicallaw.com/7-100-4206, 1993, accessed 25th October 2007
Websites
www.londonstockexchange.com/en-gb/about/cooverview/history.htm
www.euroclear.co.uk/home/home.html#/company/timeline.html www.bcs.org/server.php?show=conWebDoc.1926
There have been many historical moments along the Stock Exchange’s timeline, each helping it on its way to worldwide prominence. One of the most significant of these was the “Big Bang” on 27th October 1986 (londonstockexchange.com).
On this date of deregulation, the London Stock Exchange became a private limited company and the abolition of fixed commission charges precipitated a complete alteration in the structure of the market.
In 1987 London's antiquated paper-driven procedures almost collapsed under the sheer weight of trading volumes resulting from the unusually buoyant market (Drummond, 1998). These procedures simply had to advance in order to compete with other financial markets worldwide.
Taurus was a computer program that was intended to provide the Stock Exchange with a "state of the art, all conquering" automated system of electronic transmission. This would enable the securities industry to remove paper from the system (in the form of physical share certificates). However, the UK securities industry is very diverse and everyone in the market wanted something different. No one was prepared to compromise so the only solution available to the Stock Exchange was to combine all the various Taurus models (17 in all) into one immensely complex hybrid (Drummond, 1998).
Unsurprisingly, it was an extortionate flop costing £75million. In March 2003, Taurus was abandoned by the London Stock Exchange (euroclear.co.uk).
In July of the same year, work began on a phased approach to the cost effective improvement of UK equity settlement (euroclear.co.uk). It was envisaged that the new system, called Crest, would bring London into line with big financial centres such as New York in having a modern method of settlement.
Crest, unlike its predecessor, has been a resounding success. In fact CrestCo (the company that owns and operates the Crest system and now known as Euroclear) was awarded one of the three trophies in the 1997 British Computer Society Awards, the most prestigious form of acknowledge of excellence in the British Computer Industry (bcs.org).
Simply put, Taurus appears to have been too complex and ambitious a system, overcomplicated further by the hundreds of staff that were involved in its development (Head, 2001). Crest on the other hand was co-ordinated by a core, high level design team of 4 or 5 who kept an overview of the entire project (Currie, 1997). This relatively simplistic (in comparison so that adopted by Taurus) approach appears to have been the secret behind the success of Crest. In trying to meet all the demands of all the transactions, an uncontrollable monster had been created in the form of Taurus. Learning from this, Crest catered only for the 10-15% of business functions that made up 85-90% of transactions. “The market went wild” at such a minimalist system (Head, 2001).
Furthermore, Taurus dictated that all member firms would have to use the system and there was no option to retain share certificates. As a result of this legal problems arose. Crest however, did not force shareholders to relinquish certificates, thus avoiding legal problems and making the system politically acceptable to its institutions.
Crest was also designed after Taurus and therefore benefited from greater technical advances and maturity. From the outset, Crest had a better chance of success. Similarly, many of the software developers who worked on Crest had previously been involved in the design and implementation of Taurus (Currie, 1997). As a result those workers had gained experience in the field and thus started from a position of strength. As had the Bank of England, who set up a company to develop Crest, in order to avoid the inherent organisational politics and difficulties which beset Taurus (unknown, 1993).
When designing Crest, supplier contracts were negotiated at a fixed price whereas those for Taurus were more fluid (Currie, 1997). This prevented suppliers prolonging jobs in order to maximise their own profit and gave an incentive to deliver their product on time and on budget. Had Taurus put similar contracts in place, it may not have cost the £75million that it did. Whilst this can go some way to explaining why Taurus was ten times over budget, it is the reasons outlined above which made Taurus such an infamous failure.
Sources Used:
Articles
Currie, W “Computerising the Stock Exchange: A Comparison of Two Information Systems” Blackwell Publishers Ltd, 1997
Drummond, H “Riding a Tiger: Some lessons of Taurus” Management Decision, 1998, Volume 36 Issue 3
Duffy, M “London’s Embarrassing Mistake” Wall Street and Technology, 1993, Volume 10 Issue 10
Head, C. H “Taurus and Crest, Failure and Success in Technology Project Management”, Henley Management College, 2001
Unknown “Crest: Little Taurus” www.practicallaw.com/7-100-4206, 1993, accessed 25th October 2007
Websites
www.londonstockexchange.com/en-gb/about/cooverview/history.htm
www.euroclear.co.uk/home/home.html#/company/timeline.html www.bcs.org/server.php?show=conWebDoc.1926
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