Settlement process - Australia
Settlement cycles
ASX-listed securities: | T+2 |
Austraclear-eligible securities: | Usually T+2 |
Unlisted equities: | Negotiable |
Settlement flow
- Against payment settlement of ASX-listed securities (CHESS net settlement batch)
CHESS net settlement is based on the Bank for International Settlements (BIS) model 3 (net settlement of securities and net settlement of cash), but does not offer a truly simultaneous exchange of the securities and funds.
Between Trade date and SD: Settlement instructions are submitted to CHESS. Upon successful matching, securities and funds are irrevocably committed to settle. Counterparties' net funds settlement positions are checked by their appointed clearing bank.
11:30 (Sydney time) SD: This is the CHESS input deadline for transactions due to settle through net settlement.
Between 11:30 and 12:00
(Sydney time) SD:ASX Settlement (as the operator of CHESS) instructs each clearing bank to register its net payment instructions (credits and debits) through the RBA's RITS payment system.
13:00 (Sydney time) SD: When all net payment instructions have been registered and a zero sum has been achieved, ASX Settlement instructs RITS to effect all net payments simultaneously. Net cash positions are settled on Exchange Settlement Accounts held at the RBA.
13:30 (Sydney time) SD: ASX Settlement completes the settlement of the net securities positions within CHESS following the payment execution through RITS. (Regulations permit settlement of the securities transfers until 16:00 (Sydney time) in exceptional circumstances.)
- Free of payment transfers of ASX-listed securities (CHESS demand facility)
Demand deliveries are transferred by CHESS throughout the entire business day (except for a short period of time during the settlement of the daily CHESS net settlement batch). The CHESS demand transfer deadline is 19:00 (Sydney time).
- Austraclear settlement, against payment
Austraclear's settlement platform offers true BIS model 1 settlement (gross simultaneous settlement of securities and funds).Between Trade date and SD: Settlement instructions are submitted to Austraclear. Austraclear attempts to match the counterparty's instructions in real time.
Between 7:30 and 16:28 for FOP settlement
Between 09:15 and 16:28 for DVP settlement
(Sydney time) SD:
Upon completion of the provision check, securities and funds are irrevocably committed to settle. Participants can choose to settle transactions automatically (securities and funds are transferred as soon as provision becomes available) or manually (participants actively manage their assets and decide for themselves when settlement is to be completed). Settlement is simultaneously completed within Austraclear (securities) and within the Reserve Bank of Australia (through Austraclear's link to RITS).
16:28 (Sydney time) SD: This is Austraclear's input deadline for transactions due to settle on a same-day basis.
- Austraclear settlement, free of payment
Securities can be transferred free of payment in Austraclear until 19:00 (Sydney time). - Settlement of unlisted equities
Unlisted equities are either settled by book-entry only (in the registry's books) or by physical delivery (issuance or re-issuance of physical registered certificates). In both instances, an Australian Standard Transfer Form (STF) must be executed by both the seller and the buyer in order to register the change of ownership. Once executed, the STF (together with the existing physical certificate, if any) is lodged with the registry that then proceeds to re-register the position in his books (or to issue a new certificate, if any).
In against payment transactions, sales proceeds are usually paid by the receiving agent upon receipt of the STF from from the delivering agent.
Registration
Foreign investors' positions in ASX-listed securities are normally registered in CHESS in the name of the Australian sub-custodian's nominee. Transfer of ownership in CHESS occurs when securities are transferred from one account to another. CHESS operates automated links to the principal registers of ASX-listed companies so that transfers are registered almost simultaneously in the principal registers upon CHESS settlement.
Austraclear-eligible securities are held by and registered in the name of Austraclear Limited. Transfer of ownership in Austraclear occurs when securities are transferred from one account to another and positions do not need to be re-registered otherwise.
Transactions in unlisted equities require a re-registration in the company's register as outlined in the Settlement flow section above. The full re-registration process (from the issuance of the STF up to the re-registration or re-issuance of new certificates) generally takes up to seven business days.
Penalties
ASX transactions that fail to settle on the contractual settlement date are governed by the settlement failure rules defined by the ASX Settlement Rule 10.11.12. Pursuant to the rules, settlement participants will be required either to buy back the shortfall on T+5 for settlement on T+7 or to borrow the shortfall and deliver those financial products pursuant to the rescheduled batch instruction by T+6 (resulting in settlement of the shortfall by no later than T+8). ASX will enforce the close-out requirement by referring any outstanding settlement position that has not been resolved by T+8 to ASX Markets Supervision for consideration of an appropriate supervisory response, including possible referral to the Disciplinary Tribunal.
Austraclear transaction that fail to settle on the contractual settlement date are governed by the settlement failure rules defined by the Australian Financial Markets Association (AFMA http://www.afma.com.au/). Pursuant to the rules, failed transactions are to settle on the first business day after the contractual settlement date at the original agreed settlement price (plus accrued interest for one additional day). If settlement continues to fail, the original agreed settlement price (plus accrued interest) will continue to apply unless the contracting parties agree otherwise. The rules further specify that if a deal has not settled within one hour of the scheduled settlement time and the seller believes settlement is unlikely, he should contact the buyer to inform him of the likely settlement failure.
Failed settlement of unlisted equities is not specifically governed by any late settlement or penalty rules and are resolved on a case-by-case basis.