ISE welcomes agreement on settlement systems

The Irish Stock Exchange has welcomed an agreement between settlement systems in the US, Britain and Ireland, which is expected to improve trading in US shares and could offer Irish investors a cheaper route to dealing in US shares.

A spokeswoman for the Irish Stock Exchange, Ms Gerardine Jones, said the agreement was a "very positive development", which would probably lead to increased interest in the US market from Irish investors.

Under the current system, charges for buying US shares can cost considerably more for Irish investors than the amount they would pay in commission and other charges for buying shares in Dublin.

The proposed direct connection between Nasdaq, the secondary US market, and CrestCo, the company which operates Britain and Ireland's share settlement system, will enable Irish brokers to link in with the US settlement system, run by Depository Trust, through their usual CrestCo connection. This will cut down significantly on administration costs and streamline the entire settlement process.

"It is good news all round for brokers and investors," according to Mr John Keilthy of NCB Stockbrokers. "It will allow brokers in Ireland to use the existing and established system of CrestCo to settle American stocks. This will lead to greater efficiency and cost benefits." The new link is expected to go live in March. It will apply only to the 5,000 Nasdaq-listed shares and those in Standard & Poor's 500 index. However, these tend to include many of the high-technology stocks such as Microsoft which are extremely popular with Irish investors.

The US share market is an increasing area of growth for the Irish investor, according to Mr Keilthy. "There are a significant amount of American subsidiaries located in Ireland, which means many Irish employees have stock and share options in the US market," he said. "There is also a greater awareness of what's going on in the US market, especially with regard to technology shares." Mr Keilthy said the initial benefit will flow to stockbrokers, who until now have absorbed the extra costs involved with dealing in the US market. Eventually, however, greater efficiency could lead to savings for customers, he said.

The announcement of the new link follows a high-profile advertising campaign run by Nasdaq in Britain. It is estimated that since the start of the Nasdaq campaign, dealing by non-US investors in American shares has risen between three- and five-fold.