ASX Alert: Settlement changes coming soon

Jacob Joseph 25 February 2016

ASX Alert-450

If you trade shares you need to know about these changes to the trade settlement period.

The Australian Securities Exchange (ASX) is shortening the trade settlement period by one day to two business days. If you trade on the ASX or on alternative trading venue Chi-X, you need to be aware of these important changes. A curtailed settlement period will mean faster and easier accessibility to your money once you've sold or bought shares.

The ASX’s current settlement period of three business days (T+3) will be shortened to two business days (T+2) effective from the 7th of March 2016. This means both debits and credits for trades will automatically be processed one business day earlier.

What does T+2 and T+3 mean?

When you trade on the ASX, there are two key dates for each trade: The Trade Date (T) and the Settlement Date.

The Trade Date (T) is the actual day your order to buy and/or sell shares is processed and results in a trade. For example if you order shares of Cochlear on the 10th of March 2016, that's called the Trade Date.

The Settlement Date refers to the time when you must give money to the buyer and seller

Now, when the new changes come into effect, the settlement period will be shortened by one day. For example, take Tuesday as your Trade Date, your Settlement Date will be two business days later on the Thursday.

How do these changes affect me?

The incoming changes will apply to the following securities traded on the ASX and Chi-X:

  • Exchange-traded funds (ETFs).
  • Government bonds.
  • Warrants.

There are no changes to international shares or contracts for difference (CFDs).

To make sure you don’t run into trouble, you’ll need to ensure that you have enough funds in your settlement account by the morning of the Settlement Date.

Besides making sure adequate funds are in your account, there’s no need for you to do anything else; the changes will happen automatically.

The changes to dividends and corporate actions

The ASX will trim the period between two important dates for corporate actions – the ex date and the record date – by one day. The record date is when company looks at its shares to figure out who the dividends need to be paid to.

Any shareholders on the company’s share register on this date will receive the dividend when it’s paid. The ex date is two business days before the record date. With the new changes, the ex date will change from two business days to one day before the record date.

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