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Settlement services and pricing

ASX's model for settlement maximises efficiency through the netting of settlement obligations in each individual equity and the netting of all payment obligations, while minimising the risk of settlement failure.

Settlement and the role of CHESS

The CHESS sub-register

To facilitate settlement between participants on a delivery versus payment basis (DvP), CHESS electronically registers the title (ownership) of shares on its sub-register. Investors can choose to have their holdings registered in one of two ways:

  • on an Issuer Sponsored Sub-register or
  • on the CHESS Sub-register.

The two types of sub-register provide alternative forms of registration for shareholders and the shares they own. Every ASX-listed company manages its own Issuer Sponsored Sub-register for the registration of shares in their company alone. This form of registration is also referred to as being ‘Issuer Sponsored’.

Alternatively, shares in any listed company can be registered in the CHESS Sub-register. This form of registration is held within the CHESS system and allows brokers to manage their sponsored clients' shareholdings, while the client retains legal title to those shareholdings. This form of registration is also referred as being 'Broker Sponsored'.

An investor who is Broker Sponsored can include a variety of different shares in a single registration held in CHESS under that investor's name. This has the advantage of simplifying the administration of a portfolio by consolidating all shareholdings into a single account. It also provides investors with comfort and confidence that their holdings are secure and can only be affected through receipt of proper instruction from them. CHESS Holding Statements are also generated directly from the sub-register and sent to investors to provide a form of independent validation of their share purchases, sales, transfers and holdings. There may also be benefit for frequent share traders during the settlement process since their details will already be registered with CHESS.

For brokers, holdings being maintained on the sub-register also has the advantage of reducing their risk in facilitating settlement of market and client transactions through expediting both the movement of securities in preparation for settlement and the timely allocation of shares to client accounts post settlement. Finally, for issuers, the CHESS sub-register provides both a cost effective manner to maintain a register of shareholders and an efficient and accurate mechanism to process corporate actions.

This service is unique to the Australian equity market, as is its inclusion within standard settlement fees.

When equities are bought or sold in Australia, title or legal ownership of those equities is exchanged for money. This exchange is called settlement. The diagram below shows the relationship between Australia's trading, clearing and settlement services:

Settlement is effected by a world-class computer system called CHESS, which stands for the Clearing House Electronic Sub-register System. Usually, two business days after a buyer and seller agree to a trade, CHESS effects the settlement of that trade. It does this by transferring the title or legal ownership of the shares while simultaneously facilitating the transfer of money for those shares between participants via their respective banks. This type of settlement is called Delivery versus Payment (DvP). It is irrevocable.

CHESS achieves DvP settlement through a Model 3 multilateral net batch settlement mechanism (for an explanation of Model 3 settlement and how it differs from other models please see Section 5.1 of the RBA's 'Review of Settlement Practices for Australian Equities').
 

This batch settlement completes at around 12:30pm each day and involves the determination of each participant’s net funds and security delivery obligations and the net funds obligations of all participants’ payment providers. This maximises the efficiency of settlement by:

  • netting settlement obligations (buys and sells) in each individual equity into one net buy or sell
  • netting all payment obligations (pays and collects) into one net pay or collect.
     

It does this while minimising the risk of settlement failing.
 

Funds settlement (the transfer of money) occurs across the Exchange Settlement Accounts of those payment providers in the Reserve Bank of Australia’s Information and Transfer System (RITS). Once completed, this triggers the movement of securities from delivering to receiving settlement participants within CHESS. These multilateral payment netting arrangements, which are key to the settlement efficiency of the system, are approved under the Payment Systems and Netting Act.

Settlement Pricing

ASX Settlement operates a settlement system and a fully electronic securities depository for products traded on ASX, other Approved Market Operators and Approved Listing Market Operators.

ASX Settlement charges participants for holdings transfers and DvP settlement to meet novated obligations between the participant and ASX Clear and non-novated obligations directly between participants.

 

Cash market settlement fees

Headline cash market settlement fees

Service  Explanation  Charge
Batch Settlement DvP Market settlement of Delivery versus Payment obligations per line of stock $0.30
DvP Settlement Delivery versus Payment between two participants $1.30

Cash market settlement fee schedule

The fee schedule sets out the fees for cash market settlement services for ASX Settlement participants and a brief service description for each of the services.  It also provides the details of the ASX cash market settlement revenue sharing scheme.

Participants with queries on the fee schedule should contact their ASX Account Manager.

Worked examples - headline settlement fees

Example 2: Bilateral transaction off exchange, settled

A bilateral transaction conducted off exchange (or conducted on an ALMO) involving two participants and which is settled by ASX Settlement.  This transaction is not novated by ASX Clear and, as such, does not incur a clearing fee.  Each participant sends a dual entry settlement notification (101 message) to CHESS and CHESS will then match the instructions ready for settlement.  For this service, ASX Settlement charges each participant $1.30 (per 101 message).  If the transaction is full DvP, it is included in the DvP settlement batch.  For this service, ASX Settlement will charge each participant $0.30 for DvP batch settlement confirmation (full DvP only, per 156 message generated from a 101 message).  This fee will not be charged if the transaction is free of payment.

Diagram 2: Bilateral transaction off exchange, settled

Example 1: Exchange traded transaction, cleared and settled

A transaction is traded on exchange (ASX or Chi-X) involving two participants.  This trade will be novated by ASX Clear and it will be automatically included in the Delivery versus Payment (DvP) settlement batch.  For this service, ASX Settlement will charge each settlement participant $0.30 for DvP batch settlement confirmation (full DvP only, per 156 message).

Diagram 1: Exchange traded transaction, cleared and settled

Transparency in relation to fee changes

Participants are notified of any fee changes by way of market notice.

If ASX changes cash market clearing and/or settlement fees, participants will be provided with information to assist in their analysis of the impact of clearing and settlement price changes on their total service costs. In the event that fees are changed, participants will be notified individually of the pricing changes and the implications for their businesses.

Market notices are available via the participant portal on ASX Online.  For access contact the ASX Online Help Desk on 131 279 or email.

Non-discrimination - fee waivers and discounts

ASX Clear and ASX Settlement do not discriminate between different participant types with respect to fees and charges.

Under Financial Stability Standard guidelines, ASX is required to publish its policies with respect to any available fee waivers and discounts.  Under the Code of Practice for Clearing and Settlement of Cash Equities in Australia, ASX is also required to provide the details of the applicable terms, conditions and eligibility criteria of any rebates, revenue sharing arrangements and discounts applicable to each cash market clearing and settlement service

Fee and billing process

ASX Clear and ASX Settlement are wholly-owned subsidiaries of ASX Limited (ASX) and are responsible for the provision of clearing and settlement services to ASX participants.

Fees are invoiced by ASX Operations (which is also a wholly-owned subsidiary of ASX) on behalf of ASX Clear and ASX Settlement. Invoices are issued monthly in arrears.

Quarterly clearing and settlement activity reports are provided on request to cash equity clearing and settlement participants. The reports include a breakdown of headline services, quantities and unit prices over the calendar quarter, including historical charting.