The Chaps and Crest settlement systems will have extended operating hours as of 20 June 2016. What does this mean and how will this affect companies?

The longer hours were announced last year by Euroclear UK & Ireland, the UK securities depository which operates the Crest settlement system, and the Bank of England, owner of the real time gross settlement (RTGS) system that processes Chaps payments.

The closing time for Chaps will be at 18.00 (GMT) instead of at 16.20. Crest's settlement day will also be extended to 18.00. The purpose of this move is to align the Chaps and Crest settlement day with the typical business hours of many participants of these systems.

The Bank of England has this useful summary of current and future Chaps and Crest timetables on its website: 

Forum on Chaps/Crest changes - 20 June 2016

Your bank should have informed you of these changes. Financial institutions will be preparing by making changes to IT systems and legal documentation and a forum will be held on 20 June – the extended Chaps/Crest settlement day forum - to facilitate discussion and resolution of issues. 

Benefits for end-users

So what are the benefits for the end users?

• Market participants will be able to make Chaps payments later in the day to fulfil sterling cash obligations, enabling better risk management.
• Financial market participants and corporates will be able to undertake some funding and investment decisions later in the typical business day, so there will be enhanced flexibility for balance sheet management.
• There will be overall greater flexibility for end-users because the settlement day will be aligned more closely with the typical business day, allowing corporates to make high-value transactions later in their business day.

Seven actions to prepare for Chaps' extended hours

What can companies do to prepare for Chaps' extended hours?

1. Contact your bank. They are the ones that participate directly in the Bank of England's RTGS system. Ask your bank about the new cut-off times and note that the times your bank gives you may differ from those issued by the Bank of England (above).
2. Tell your suppliers or customers about any changes, if these affect your company's service or payments to suppliers.
3. Put processes in place so you can receive payments later in the day. For corporate treasurers, this could mean adjusting your cash/liquidity requirements or a delay in overnight processing. Consider whether there will be any knock-on effect for your counterparties or customers.
4. Will the new extended Chaps hours mean that you also need to extend your operating hours? This may affect staffing, IT systems and support, legal documentation, processes and budgets.
5. Consider whether you can receive same-day credit for the later payments.
6. Will the change affect your end of day cash management process?
7. Some corporates have bespoke technical links with their banks for making Chaps payments. Discuss whether these arrangements need to be changed in any way.

More information is available on the Chaps website.