The Lemon Fool

Holts wrote:So , have written to Selftrade now , who will no doubt go into denial .

Please report back, if they reply

Holts wrote:........ and you can trade them online .

Not yet, I just tried.

Having been able to trade these online via selftrade since July I Have just had email from Skipton , they are being withdrawn from crest as the market makers/ brokers were unable to settle the trades .

I have no real knowledge of the systems , anyone know why this would be ? Particularly as their other issue of PIBS has no problem .

It would seem they are pointing the finger at Link , suggesting that they be contacted for any discussion , I have emailed accordingly and will post any reply .

I got the same email:

"Dear Investor

Thank you for your interest in the Skipton Building Society 12.875% PIBS.

Following the admittance of the Skipton 12.875% PIBS to trade in CREST in July this year, we have unfortunately had to take the decision to withdraw them from the CREST system from 11 October 2019. The reason for us having to withdraw the PIBS from CREST is that the brokers / market makers for this security were unable to settle the trades. From 11 October the PIBS will trade and settle in certificated form as they did before they were admitted to CREST.

We are sorry for any inconvenience caused - if you need to discuss this any further, please speak to Link Asset Services (the registrar) on 0371 664 0300.

King regards"

It makes no sense to me

the brokers / market makers for this security were unable to settle the trades.

Please can someone explain what the reasons for this might be, and why Skipton would not be able/willing to solve the issue?

bruncher wrote:

the brokers / market makers for this security were unable to settle the trades.

Please can someone explain what the reasons for this might be, and why Skipton would not be able/willing to solve the issue?

CREST is also an electronic trade confirmation (ETC) system through the use of Trax. When two or more parties in a transaction agree upon a deal, they confirm their sides of the transaction through an electronic transfer. All parties involved are required to submit confirmation of all transaction details to CREST. If details of the transaction are not the same for each party, CREST indicates all issues and notifies parties of discrepancies. This aspect of the CREST system allows for a speedy resolution and faster processing of the transaction.

It makes little sense to me. Here is my guess: I'm assuming since it wasn't on CREST until recently most of the shares are in certificate form. So, MM's settle transaction in CREST but then the seller does not provide the share certificate to the MM so they can't settle with the buyer's MM. Or, put another way there is so much admin around it that occasionally goes wrong and it isn't worth the MM's making a market.

I asked Skipton if they could elaborate on the problem, here is the response:

The PIBS were unable to be electronically matched in CREST due to the market-makers trading these securities at face amount (i.e. one PIB has a notional amount of £1) which differs from what the registrar are able to correctly record (i.e. one PIB has a notional amount of £1000). This meant that brokers could have potentially been left with unsettled positions. Our registrar was in touch with the London Stock Exchange and Euroclear (CREST) regarding this and their solution was to withdraw the PIBS from trading in CREST.

I don't understand why there should be a problem with SKIP particularly, since many bonds are traded in 1,000's. Must be something else going on. Who might have an interest in illiquidity?

so if they cant go through CREST, how are they being traded? how can you purchase them at the minute?

Mick

As I have mentioned before I have never had a problem trading these online at HL. Current quote to buy/sell 10k nominal 202.25/200.01.

hiriskpaul wrote:As I have mentioned before I have never had a problem trading these online at HL. Current quote to buy/sell 10k nominal 202.25/200.01.

thanks Paul

is it definitely £10k nominal HL states minimum initial investment of £1k

MickR wrote:

hiriskpaul wrote:As I have mentioned before I have never had a problem trading these online at HL. Current quote to buy/sell 10k nominal 202.25/200.01.

thanks Paul

is it definitely £10k nominal HL states minimum initial investment of £1k

1k nominal is fine. I just tried trading the largest amount I could. Above 10k nominal I could not get online quotes, instead having to submit a deal for an HL dealer to try to carry out.

This is a reply I have had from Link , I am now waiting to see what happens to those I deposited with selftrade , because they appear to refuse to handle anything that does not settle in crest , which in turn means I will not be able to work them into my ISA , very irritating given tax implications.

All other PIBS are issued at face amount with exchange market size in multiples of face amount. For example 15,000,000 shares issued at face amount but tradeable in blocks of 2,500 market size.

The 12.875% Skipton PIB (GB0008194119) was issued as 25,000 certificates of one (1) unit. Each unit represents 1000 shares. The register reflects that 25,000 shares have been issued and this means that when the dematerialisation option was offered on 1/August, we were unable to meet the demand for shares at face amount. For example one stock withdrawal for 25 units would consume the entire register.

The only way to resolve this was for Skipton to instruct a reorganisation of the register to face amount of 25,000,000 shares. Unfortunately Skipton declined the reorganisation and rematerialized the shares to allow residual settlement in the market.

All dematerialised shares have been rematerialised and certificates are in the process of being issued.

Just to confirm, HL have this to say about SKIP (Skipton 12.875% Permanent Interest Bearing Shares, GB0008194119):

The minimum quantity this stock can be dealt in is 1000.00 units increasing in increments of 1000.00 units thereafter.

Placing an online order for 1k nominal gave me back a quote of 202.25 and the web site will not allow attempts to trade in amounts less than 1k, nor amounts that are not increments of 1k.

In the past HL have always told me that they can only handle PIBS and bonds that are held in CREST. I will email HL and ask them to clarify how this particular PIBS is settled because I am totally confused by all this.

note from Selftrade today advising they have been withdrawn from crest and have been received in certificated form and my holding has been adjusted , which it has not as yet . They have not stated they are sending me the certificate so I am just going to do nothing and see what happens next . I may be off to Lansdown .

Reply from HL:

The Skipton 12.875% Permanent Interest Bearing Shares are not held in CREST as they are traded in certification form. However it is our dealing system that trades in the certificates, not you as a client. Therefore if you were looking to deal in this holding you can still do so either online or over the phone at our standard dealing rates.

So I was wrong. In the past I have been told that HL only allow trading in bonds that are held in CREST. PIBS of course are not bonds, but I am surprised they allow on-line trading in these.

hiriskpaul wrote:Reply from HL:

The Skipton 12.875% Permanent Interest Bearing Shares are not held in CREST as they are traded in certification form. However it is our dealing system that trades in the certificates, not you as a client. Therefore if you were looking to deal in this holding you can still do so either online or over the phone at our standard dealing rates.

So I was wrong. In the past I have been told that HL only allow trading in bonds that are held in CREST. PIBS of course are not bonds, but I am surprised they allow on-line trading in these.

So how do they do this? Are they using a market maker which works the certificated trades in the background, or do they match trades within their own broad customer base? And do they settle in the usual T+2 for SKIP, I wonder?

Interesting reply from HL, Paul, thanks for sharing.


GS

Am I wrong to think that Skipton should be sorting this out so that SKIP is tradeable in Crest? I am sceptical that there is an insurmountable technical/logistical problem.

Am I the only Fool interested in solving this?

Does anyone have any ideas about next steps?

bruncher wrote:Am I the only Fool interested in solving this?

Does anyone have any ideas about next steps?

It seems SelfTrade do not allow trading online in them, but HL do. I use HL so if I did want to buy them I could, so there is nothing to fix for me.
Do you know how many other brokers align with SelfTrade?

Wizard wrote:

bruncher wrote:Am I the only Fool interested in solving this?

Does anyone have any ideas about next steps?

It seems SelfTrade do not allow trading online in them, but HL do. I use HL so if I did want to buy them I could, so there is nothing to fix for me.
Do you know how many other brokers align with SelfTrade?

Surprisingly iWeb allow trading in SKIP. Not online, but trading through a dealer is only £5.