Transition to T+2 Settlement for Cash Equities
January 19, 2016
The ASX is shortening the settlement period for sharemarket trades by one day from the current three business days after the trade takes place (T+3) to two business days after the trade takes place (T+2). This change will be introduced from Monday 7 March 2016, and will affect all brokers and their clients across all financial products traded on a securities market in Australia. The ASX has outlined the changes on their website and also released a brochure which can be downloaded here.
What does this mean?
Essentially, the change is designed to make the process of buying and selling shares more efficient. Once T+2 has been introduced, when you sell shares you will receive the proceeds one business day earlier than now. Conversely, when you buy shares you will be required to fund the purchase one business day earlier than now.
The shortened settlement period means that it will be essential to make use of an electronic payment method to pay for your share purchases and to receive the proceeds of your share sales. Cheques, which take 3 clear business days to clear (and often 1-3 days post), will no longer be a viable method of paying for your share purchases or receiving proceeds from your share sales.
By far and away the most efficient method of settling sharemarket transactions is via a bank account which is linked electronically to your share trading account. If your account is not already setup in this way, please print and complete our Direct Debit/Credit Authority and return it to your advisor or direct to a member of our banking team at firstname.lastname@example.org. To help maintain security and eliminate any potential errors, your advisor or another member of our staff will call you to confirm your instructions. We also request that a copy of a recent bank statement accompanies this form.
Download: Direct Debit/Credit Authority
When completing the Direct Debit Authority form, it is our preference that you tick the both boxes, which gives Pershing (Taylor Collison’s clearing and settlement provider) the ability to both credit your account with share sale proceeds, and to debit your account with share sale purchases on settlement day. Once your banking details have been linked to your trading account, settlement will occur automatically and you do not need to worry about remembering to process payments manually. Note: You will however be required to make sure that the account has sufficient available funds to pay for any share purchases.
If you do not wish to settle your share purchases automatically via this method, you may elect to use another electronic payment method (such as BPay or EFT), however from Monday 7 March 2016 you will need to make your payment earlier in accordance with the T+2 settlement timeframe.
We also strongly recommend that you elect to receive your share trade confirmation notes electronically. This ensures that you receive confirmation of your trades on the day of the trade, giving you more time to arrange for settlement. If you are not already receiving share trade confirmation notes via email, please complete the following form and return it to your advisor or one of our reception staff at email@example.com.
Download: Email Trade Confirmation Authority
If you have any queries, please do not hesitate to contact your advisor for more information.