Settlement process - New Zealand
Settlement cycles
Equities: | Trade date +2 |
Debt securities: | Trade date +2 (normally) |
Settlement flow
NZCSD settlement is based on the Bank for International Settlement (BIS) model 1 (gross simultaneous settlement of securities and funds). Trades settling through the NZCSD's NZClear are generally pre-matched by telephone on the business day preceding the Settlement Date. Local settlement agents would commonly input transaction details into NZClear on the Settlement Date.
If the transaction details match, and provided that the selling and buying agents hold the required securities and funds provision, the NZCSD transmits a payment order to the RBNZ's ESAS platform. Upon confirmation of the cash transfer, the NZCSD simultaneously transfers the securities from the selling agent's account to the buying agent's account.
NZCSD settlement occurs throughout the day up until 16:45 (Wellington time).
Registration
Securities held in the NZCSD are registered in the name of the New Zealand Central Securities Depository Limited.
Stamp duty
No stamp duty is payable in New Zealand.
Penalties (buy-ins etc.)
The New Zealand market has both formal and informal arrangements to address failed trades. For on-exchange trades there are progressive penalties imposed by NZX against brokers that cannot meet their obligations. A cumulative daily penalty is levied for failure to settle by SD. The penalty will continue to be levied until the trade is settled or cancelled .
Buy-ins are very rare at the NZX. Buy-ins can be invoked at the discretion of the NZX. If an on-exchange trade remains unsettled after four days SD, a buy-in may be conducted on SD+5. Alternatively, a close out will be completed on SD+6. A buy-in fee of NZD 1000 and close out fee of NZD1000 may also be incurred.
Penalties for late delivery are charged at NZD 659 plus 6bps per day until the trade is settled.
For off-exchange trades the counterparties are left to make their own arrangements on the failed trade and any compensation is by way of interest payments according to a market formula.