The Irish Stock Exchange this week reduced the standard settlement period for trading shares on the exchange from five business days to three.
The exchange also introduced a new electronic way for members to hold shares - Crest Personal Membership. Private investors can establish Crest accounts through their stockbrokers.
Shareholdings can also be held in nominee accounts, where the investor can carry out paper-free trading. With nominee accounts, the shareholder is technically one step removed from the investment as the shares are held in the name of the nominee company, not the beneficial owner.
The main benefit of electronic shareholding compared with paper certificates is that transactions can be processed faster and more easily. Clients will have less paper to deal with and will not have the inconvenience and expense of replacing lost transfer forms or certificates.
There is no obligation on investors to move to the electronic system but they may lose out in a faster trading environment if they do not. According to Davy Stockbrokers, it will no longer be possible to wait for clients to bring their paper certificates to a bank branch and for the bank to forward them to the firm, as the broker will not be able to process the transaction on time to meet the three-day settlement deadline.
"If clients decide to hold on to their shares in certificate form, they'll face delays when selling them. This is because we will not be able to place sale orders on their behalf until we receive the certificates and transfer forms," a statement from Davy said.
Crest Personal Membership is available from virtually all stockbrokers but is only being actively promoted by about half of the firms. Some stockbrokers favour the similar efficiency and economies of scale of nominee accounts.
The investors' rights to shares held in electronic form are identical to the rights he or she would have had as a paper-based investor.
An investor does not have to hold all of their shares in Crest and can keep some holdings in certificated form or convert their shares back into certificated form if they wish.
This kind of trading account is especially useful for an active investor. The electronic account is looking to the near future in the context of online trading, as plans for the introduction of one-day settlement next year are in place.
Mr Brian Healy of the Irish Stock Exchange said there needs to be a higher level of dematerialised holdings to facilitate the move towards direct dealing online.
As a Crest Personal Member, the investor's name will appear on the register as the legal owner of all the securities. All company information, dividends and voting documentation will be sent directly to the personal member.
