TAURUS and CREST - The hazards of technology

A phenomenon called the “Big Bang” occurred when multinational corporations gained control of age-old investor businesses. For the London Stock Exchange (LSE), the main effect was a massive structural change to their trading methods. The open trading floor gave way to new electronic trading rooms. This lay the foundations for modern processes of exchange and the requirement for a complex, forward-looking computer system.

By 1989, the development of such a system was announced in the form of TAURUS - a program of automated transaction settlement which would accomplish dematerialisation of stock certificates. However, by March 1993 TAURUS had yet to be completed, and termination was announced by LSE chief executive Peter Rawlins.

There are many reasons for the failure of TAURUS which can ultimately be reduced to three - management, policy and accountability. As the TAURUS system was mandatory for all members of the LSE, those in charge felt that it was necessary to create a system which was both standardized for general use and individualized for each group concerned. As member groups had different interests and functions each demanded TAURUS managed their specific tasks. A problem arisen because these functions were extremely diverse and often complicated. Against better advice, the management team tried to please each party, some of which continually ‘moved the goalposts’ as far their needs were concerned. This continued into the developmental stage of the system meaning no progression could really be made as structural changes occurred so frequently.

Another problem in the management of the TAURUS system was that the LSE attempted to develop it, rather than employing another company to do so. As a result, TAURUS was part of the LSE, not just an investment and was ran in an inappropriate way, via a committee. Due to this, the press were very interested in the scale and size of the project, many already presumed that it would fail long before any evidence of this became available. Driven by fear of failure the TAURUS team continued the project for longer than it should have, spending more and more money on an impossible goal in an unworkable timescale. This further heightened press and public interest, while disrupting public relations and creating more pressure.

Policy resulted in a 150 page document of legislation to which TAURUS had to comply. As the Treasury had agreed to waive stamp duty following the implication of the system (estimated as £800million per year) more parties became involved. Stakeholders such as the Bank of England and the Department of Trade and Industry were concerned by the dematerialisation of stock certificates. This resulted in further set backs.

In accountability terms, there was an imbalance in the relationship of power and responsibility in the development of TAURUS. The LSE bore all the responsibility yet had no authority to stop other parties interfering with the design process. As a result, those who were least accountable had the greatest influence. Against the odds, the TAURUS team continued until 1993 when the system was put to rest at an estimated cost of £75million to the LSE and £400million to the City of London.

Within months, a new development process had begun. The proposed CREST system was controlled by a not for profit company CRESTCo through the Bank of England. CRESTCo had learnt from the mistakes of the TAURUS team and because the implication of the system was voluntary it ignored the demands of LSE members and initiated the development of a very simple system. CRESTCo recognised that a small number of features could cover the majority of the LSE’s transactions. It maintained good press relations through regular information updates end encountered very few design faults.

CREST’s main setback occurred through the assumption that the Treasury would not claim stamp duty (as with TAURUS) however as CREST was not an enforced system, this was not the case. After launching, CREST encountered two separate operational faults but these were quickly overcome through skilled supervision and the system was operational within nine months.

CREST was simple and well managed where TAURUS was complex and poorly handled. These are the main differences between the two systems and the reason one remains so successful while the other failed miserably.