Listing in London – how to solve the settlement issue

Author: Avram Kelman, Paul Airley

Many foreign companies find the London Stock Exchange an appropriate place to come to for the purposes of raising capital and increasing the visibility of their companies. There is an easily overlooked but critical point that has to be considered when listing in London – the electronic settlement system by which shares on the London Stock Exchange are traded.

To gain a London listing, shares must be eligible for electronic settlement unless the London Stock Exchange agrees otherwise. The problem for foreign issuers is that shares or other securities issued by companies from jurisdictions other than the UK or Ireland cannot be directly held in or traded through the electronic settlement system used by the London Stock Exchange, known as CREST.

To solve this problem and provide shareholders the benefit of electronic trading, a foreign issuer must create securities eligible to be admitted to CREST that mirror the underlying securities of the company. Such companies appoint a depository (typically, the company’s registrars) which becomes the registered holder of the shares, holding them on trust for the shareholders to whom the depository issues depository interests to the shareholders and these represent the underlying security on a one for one basis. These depository interests are an English law instrument and trades in them can be settled through CREST just like a regular share. Through the depository arrangements, the holders of depository interests retain full economic and voting rights over the underlying shares.

If you are a foreign company that wants to have its shares traded on the London Stock Exchange, your UK based lawyer will be able to assist you with the paperwork necessary to set up the depository interests so that this can be achieved.

Avram Kelman, Partner ( and Paul Airley, Partner

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