ASX will transition to a T+2 settlement cycle for cash equities in an effort to improve market efficiency and keep Australia at the forefront of global best practice.

In early 2014 GBST, in conjunction with the Stockbrokers Association of Australia, compiled a white paper, “Introducing T+2 for the Australian Equities Market” which detailed the benefits of introducing shorter equities settlement timeframes in Australia – such as a reduction in risk exposures, an increase in market liquidity and further alignment of the local market with international best practice.

Denis Orrock, Chief Executive, GBST Capital Markets said: “GBST’s early and comprehensive research into settlement cycle developments and our commitment to market leadership means we continue to set the benchmark for broking technology. GBST SharesTM is the most widely used back office platform in the Australian equities market, and we are proud to be showing our continued commitment to Australian market participants.”

From Introducing T+2 for the Australian Equities Market:
Whilst the Australian market compares very favourably with offshore markets in terms of settlement efficiency several factors have contributed to a desire to further reduce the settlement period to T+2. A major contributing factor has been the introduction of regular margin cover for outstanding net obligations between brokers and the central counter party (CCP) ASX Clear to mitigate the risk of a participant defaulting on their obligations to the CCP.

A reduction in the settlement period is seen as delivering the following benefits:

• A reduction in overall CCP margin cover by reducing the net outstanding obligations between brokers and the CCP
• A reduction in exposure to counterparty, credit, operational and settlement risks
• A boost in market liquidity due to faster re-investment of capital
• The potential to reduce the amount of regulatory capital required to cover unsettled counter party exposure between the broker and their clients.

The reduction of the settlement period has also been adopted as part of the forward work program of the ASX Forum.