The Australian Securities Exchange (ASX) welcomes the conclusion in the Reserve Bank of Australia’s (RBA) Review of Settlement Practices for Australian Equities, released today, that current settlement practices have served the Australian equity market well over a number of years.
Mr Colin Scully, ASX’s Group Executive, Operations said: “ASX Settlement and Transfer Corporation has processed rapidly rising levels of Australian equity trading activity in recent years in a manner that has contributed to the efficient operation of the overall market.”
“While the events of 29 and 30 January 2008 presented challenges to the settlement arrangements on those days, ASX believes the existing systems worked effectively and as they were designed to do”, said Mr Scully. The RBA’s Review of Settlement Practices for Australian Equities also raises the issue of minimising settlement delays. ASX released a consultation paper on 28 March on short selling and the management of settlement risk that included discussion on the same issue.
On the minimising of settlement delays, ASX has today released a market circular detailing measures it will introduce to promote further settlement efficiency and improve the management of settlement risk. These measures include the introduction of a close-out requirement, an increase in settlement delay fees, and accelerated processes for referring lengthy settlement delays to the ASX Disciplinary Tribunal. More information on these measures is contained in the attached market circular.
Mr Scully said: “ASX will continue to examine ways to improve our processes. The independent RBA review is an important step along this path, and we will work with the RBA and market participants to explore options that strengthen the value of a robust and well-tested settlement infrastructure.”
On the issues around the reporting of short selling, ASX is continuing to consider the submissions and the nature of possible changes to ASX rules resulting from the legislative changes foreshadowed by the Government.
On 28 March 2008 the Australian Securities Exchange (ASX) released a discussion paper on a range of possible initiatives that could improve the transparency of the volume of short selling and ASX’s management of settlement risk. diverse range of views. This Circular sets out changes that ASX will make to ASX’s management of settlement risk.
The Reserve Bank of Australia (RBA) examined the settlement fail regime as part of its broader “Review of Settlement Practices for Australian Equities.” This Circular also addresses some of the issues raised in the RBA review. As the ASX discussion paper highlighted, Australia’s current settlement performance is very good. Around 1% of all trades are delayed beyond the normal T+3 settlement deadline, and most of the shortfall is settled by T+5 at the latest. Settlement shortfalls can arise for a number of reasons, both operational and logistical.
There is no evidence that short selling (either ‘covered’ or ‘naked’) is a significant contributing factor to settlement delays.
Settlement Delay Fee Regime
SX Settlement and Transfer Corporation (ASTC) levies a daily settlement delay fee against Participants for settlement shortfalls. The current fee is 0.1% of the trade value outstanding, with a minimum (floor) fee of $50 and a maximum (cap) fee of $2,000 per security, per day. These thresholds equate to settlement shortfalls of $50,000 and $2 million respectively.
The minimum and maximum fees have remained unchanged for a number of years and have not kept pace with the increase in daily traded volume and value over time. The RBA supported ASX’s review of the settlement delay fee regime and noted that there may be a case for increasing the floor and cap fees, as well the general ad valorem rate applied to the value of any shortfall. -- www.asx.com.au
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