T+2 settlement cycle
Changes to the ASX settlement cycle have commenced. As of 7 March 2016, Australia (and New Zealand) will move towards and implement a T+2 settlement cycle.
What has changed?
Previously settlement took place three business days after the trade occurs (T+3). This has been reduced to two business days after the trade occurs (T+2). This change is applicable to asset groups including Cash Equities, Hybrid Debt, Warrant/Structured Products, Exchange Traded Funds (ETF) and CHESS Deposit Interests (including AGBs). The Australian Financial Markets Association (AFMA) fixed income products, including Australian bonds settling via Euroclear, have also been included in this change to the T+2 settlement period.
Why the changes?
A drive to improve market efficiency and a determination to keep Australia at the forefront of global best practice reinforces ASX's move from a T+3 to a T+2 settlement cycle for cash market trades in Australia. The adoption of the T+2 settlement cycle will keep Australia aligned with leading settlement practices around the world as adopted by the G20 group. Hong Kong and many European countries are already on a T+2 settlement cycle. The shortening of the settlement cycle by one business day creates a faster settlement of transactions for investors.
Morgans have been actively participating with working groups held by both ASX and System providers to ensure a smooth transition for both our business and clients. The reduction in settlement days means we need to ensure we provide clients with the ability to settle more efficiently.
How does this affect you?
To ensure clients are able to benefit from the changes the T+2 settlement cycle provides, we recommend the following client settlement services are adopted by all clients:
Electronic Contract Notes
Provide us with your current email address and we can issue your contract notes directly to your email address on the day of the trade. Please note that Australia Post may be decreasing their postal delivery times in due course, especially to remote areas.
Shares are Sponsored and controlled by the Sponsoring Participant with the holding balance clearly visible. All shareholdings are held on one Holder Identification Number (HIN), which will reduce the need for maintaining records for multiple Security Reference Numbers (SRNs).
Cash Management Accounts Service
Morgans maintains relationships with a number of banks who are authorised deposit takers. Through these relationships Morgans offers a range of Cash Management Account (CMA) products. They provide tangible long term benefits, such as monthly statements, cheque book facility, dividend crediting, internet banking, competitive returns and electronic settlement of both buy and sell transactions.
In line with our requirement to receive cleared funds prior to 10.30am (EST) on the nominated settlement date we have undertaken a review of our current settlement processes. We have included the below banking timetables to ensure we receive funds in time for the prescribed settlement, currently 10.30am EST:
Electronic Funds Transfer (EFT) and BPAY
Please ensure EFT payments are processed prior to your banks designated cut off (normally 4.00pm AEST) on or before the business day prior to the settlement date. Also note that most banks have limits on the amount you can pay electronically per day.
If you have a completed a banking details form from the Morgans account application and nominated a bank account for direct debit, please ensure the bank account allows direct debits. Direct debits will be processed the business day prior to the settlement date.
Pay by Post/Deliver*
Please ensure cheques will be received by Morgans on or before the business day prior to the settlement date.
*Please note there is significant clearance time on these payment facilities. The use of cheques and direct debit is subject to bank clearance times which can be 24 to 48 hours.
If you have any questions regarding T+2 or you would like further information regarding any of our product offerings, please contact your adviser.
For further information regarding the change to T+2, the ASX has a published the following brochure - The transition to T+2 Settlement.