The transition to the ASX T+2 settlement is here

The Australian Securities Exchange (ASX) has implemented the Trade Date (T) + 2 business days (T+2) settlement period effective 7 March 2016. This means your clients' buy and sell trades will now settle one business day earlier.

T+2 settlement example

Days are shown as an example only. T+2 will take effect from the day the trade is executed.

Products and services impacted by the changes

The changes apply to the following products traded on the ASX and Chi-X:

  • Australian shares
  • Government bonds
  • Interest rate securities
  • Exchange Traded Funds (ETFs)
  • Warrants

Exchange Traded Options (ETOs) will continue to settle on T+1 however any exercises/assignments resulting in an Australian share trade will be impacted.

Corporate action timetable reduction

In conjunction with the shortening of ASX trade settlement, the period between two important dates for corporate actions - ex date and record date has been reduced by one day.

The transition to the new two day Ex Period applies to the following corporate actions:

  • Dividends
  • Pro rata issues
  • Bonus issues
  • Capital returns
  • Security consolidation or splits

A reduction in the Ex Period does not apply to code changes, takeovers, share purchase plans or schemes and mergers.

Changes to how trades will be offset (Contra) from 7 March 2016

Multiple buy and sell trades executed in the course of one or two days will be offset and only the residual amount between the trades will either be paid from or to the settlement account upon settlement.

The ability to offset trades on T+2 has been removed as under T+2 settlement this is now the
settlement day.

Trade Scenario 1: Buy first

If your client purchased ABC shares on a Monday (Trade Date), then sold XYZ shares for a lesser value on the following day, client will need to pay the difference of the two trades on T+2.

Buy First example

Days are shown as an example only. T+2 will take effect from the day the trade is executed.

*Your client will need to ensure that cleared funds are available in their settlement account by 8am on
this day.


Trade Scenario 2: Sell first

If your client sold DEF shares on a Monday, then purchased UVW shares for a lesser value on the following day, client will receive the difference of the two trades on T+2.

Sell First example

 

Trade Scenario 3: Second trade is a higher value

In an instance where the second trade is a higher value, settlement will occur T+2 after the higher value trade is executed.

Higher value example

Days are shown as an example only. T+2 will take effect from the day the larger value trade is executed.

*Your client will need to ensure that cleared funds are available in their settlement account by 8am on
this day.

 

How the change affects your clients

Your clients will need to ensure that for buy trades, cleared funds are available in their settlement account one day earlier on the morning of T+2. Clients will also receive proceeds from sell trades one day earlier.

Cheque payments for purchasing shares are still accepted. However, it is important that your clients understand their settlement obligations outlined in our Share Trading Terms and Conditions when taking trading instructions. The three day cheque clearance now falls outside the new ASX T+2 settlement period. To ensure your clients do not fail settlement and incur penalty fees plus fail fees outlined in our Financial Services Guide, cheques must be deposited and cleared at least three business days prior to placing trades. Alternatively, they may elect to pay their trades via direct debit or BPAY payment.

Aside from that, there is no need for you or your clients to do anything.

If you have any questions in the meantime, please refer to our Frequently Asked Questions or contact us.

Frequently Asked Questions

Why the change?

A shorter settlement cycle means your clients will have quicker access to their money after selling shares and earlier receipt after purchasing shares. It will also keep Australia aligned with leading settlement practices around the world such as Europe and Hong Kong, with the United States following suit in 2017.

What happens if my clients don't have sufficient cleared funds in their settlement account on the settlement day?

Please ensure your clients are able to meet their settlement obligations prior to placing trades. Failure to provide cleared funds on the settlement day will result in failed settlement and incur penalty fees plus fail fees outlined in our Financial Services Guide.

Which products and services are impacted?

The changes apply to Australian shares, government bonds, interest rate securities, Exchange Traded Funds (ETFs), and warrants traded on the ASX and Chi-X.

There is no change to the settlement period for Exchange Traded Options (ETOs).

Are there any impacts on Exchange Traded Options (ETOs)?

ETOs will continue to settle on T+1. However, if the exercise/assignment results in an Australian share trade, settlement will take place on T+2. In the event that your clients are short stock, they will need to buy back the stock by 2pm (Sydney time) on the day of the exercise/assignment. Please ensure your clients have sufficient cleared funds in their settlement account by the relevant settlement day.

How are corporate actions impacted by the change such as dividends?

In conjunction with the shortening of ASX trade settlement, the period between two important dates for Corporate Actions - ex date and record date has been reduced by one day. With the new settlement period, the ex date has changed to two business days before the record date.

For instance, ABC Company announces it will be paying a dividend to its shareholders. The date the company checks its share registry to determine who should be paid the dividend is known as the record date. Any shareholders on the company’s share register on this date will receive the dividend when it is paid. The ex dividend date, or ex date, is two business days before the record date. Anybody who wishes to buy the shares and receive the dividend must have purchased the shares before this ex date.

Can my clients pay by cheque?

Cheque payments for purchasing shares are still accepted. However, it is important that your clients understand their settlement obligations outlined in our Share Trading Terms and Conditions when taking trading instructions. The three day cheque clearance now falls outside the new ASX T+2 settlement period. To ensure your clients do not fail settlement and incur penalty fees plus fail fees, cheques must be deposited and cleared at least three business days prior to placing trades. Alternatively, they may elect to pay their trades via direct debit or BPAY payment.

What happens if my clients pay via BPAY?

Payments made via BPAY will need to be completed on the Trade Date to ensure available funds are ready on the morning of T+2.

Are there any changes to the Contra policy?

Yes, the ability to offset trades on T+2 has been removed as under T+2 this is now the settlement day.

When calculating the settlement amount and the settlement date, it is important to consider the residual amount after the trades are offset. Where the second trade is a higher value, settlement will occur T+2 after the higher value trade is executed.

Where can I learn more about the ASX changes?

You can learn more about the ASX trade settlement changes on the ASX website or download the
ASX settlement changes brochure.

Published: 04 March 2016