The transition to the ASX T+2 settlement is here

The Australian Securities Exchange (ASX) trade settlement period has been shortened from three days to two days effective 7 March 2016. The new settlement date will be the Trade Date (T) + 2 business days (T+2). This means that your buy and sell trades will settle one business day earlier.

T+2 settlement example

In the above scenario, if you trade on Monday, settlement will take place on Wednesday. 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

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

If you execute multiple buy and sell orders in the course of one or two days, the executed trades will be offset and only the residual amount between the trades will be debited or credited 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 you buy ABC shares on a Monday (Trade Date), then sell XYZ shares for a lesser value on the following day, the amount debited on the settlement (T+2) is the difference between the two trades.

Buy First example

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

You will need to ensure that cleared funds are available in your settlement account by 8am on this day.

Trade Scenario 2: Sell first

If you sell DEF shares on a Monday, then buy UVW shares for a lesser value on the following day, you will receive the difference between 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.

You will need to ensure that cleared funds are available in your settlement account by 8am on this day.

How the ASX change affects you

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

Cheque payments for purchasing shares are still accepted. However, it is important that you understand your settlement obligations outlined in our Share Trading Terms and Conditions prior to placing trades. The three day cheque clearance now falls outside the new ASX T+2 settlement period. To ensure you 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, you may elect to pay for your trades via direct debit or BPAY payment.

Aside from that, there is no need for you 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 does the ASX refer to this change as T+2?

As of 7 March 2016, the new settlement date for Australian sharemarket trades will be the Trade Date (T) + 2 business days. This settlement period is called T+2.

Why the change?

A shorter settlement period means quicker access to your money after selling shares and earlier delivery of shares after purchasing. 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 is a Trade Date?

The Trade Date is the date your order to buy or sell shares is executed on the share market. For example, if your order to buy or sell ABC shares executes on 10 March 2016, that is your Trade Date.

What is Settlement?

When you buy or sell shares through your broker, you enter a contract to exchange the legal ownership of the shares for money. This exchange is called settlement.

What happens if I don't have sufficient cleared funds on the settlement day?

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

Will the new ASX settlement period affect trading limits?

No, trading limits are not impacted by the change.

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.

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 I pay by cheque?

Cheque payments for buying shares are still accepted. However, it is important that you understand your settlement obligations outlined in our Share Trading Account Terms and Conditions prior to placing trades. The three day cheque clearance now falls outside the new ASX T+2 settlement period. To ensure you 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, you may elect to pay your trades via direct debit or BPAY payment.

What happens if I 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 how trades are offset (Contra)?

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