The $1 trillion Australian bond and fixed income markets are to move to a T+2 settlement timeframe from early next year, complementing a similar constriction in the post-trade lifecycle in cash equities mandated by the Australian Stock Exchange.
The Australian Financial Markets Association (Afma) says the change, to be implemented in March 2016, will reduce counterparty and systemic risk and bring Australia in line with key trading partner economies.
Michael Go, head of markets at Afma says industry consultation showed that the implementation would be reasonably straightforward as conventions, systems and processes currently cater for negotiated settlement cycles for the relevant market participants.
"We’re very confident that the timeframe we have set together as an industry is a sensible one," he says. “Any institution dealing in Australian fixed income products will need to talk to their counterparts to ensure their systems and processes cater for T+2. Given much of the rest of the world is already on this cycle, or moving to it, it places the Australian market in a strong position.”
Australia is the latest in a succession of global marketplaces to reduce settlement timeframes. European markets made the move last year, while the US has committed to a late-2017 deadline to make the shift.