The New Zealand Stock Exchange will move to a T+2 settlement cycle on 7 March, the same day as Australia, according to a briefing by the Depository Trust & Clearing Corporation (DTCC).
New Zealand will move cash equities and fixed income vehicles at the same time in March, mirroring Australia’s move to bring in a T+2 settlement cycle, according to Matt Chan, head of business strategy at DTCC’s institutional services. Chan, who is based in Sydney, briefed partcipants on T+2 developments at a webinar this week.
ASX Group and NZX are working together to harmonise the process of moving from a T+3 settlement cycle to a T+2 settlement cycle. ASX is coordinating the move around cash equities, while the Australian Financial Markets Association (AFMA) is coordinating debt instruments. NZX is coordinating both cash equity and debt markets transitions, covering the NZX main board, the debt market, the alternative market, the NXT market and the Fonerra Shareholders Market, Chan says.
There have been some changes to the timing of the settlement cycle as the consultation process with industry has gone on – the settlement cut-off has been established as 11.30 a.m., but final payment settlement will be at 2.30 p.m., Chan notes.
“The ASX is doing a pretty good job in terms of their communication, and they have very various publications that they have put out in terms of checklists and other documentation,” Chan said. “There is a market implementation group that’s meeting once every quarter. We have participated in some of those and presented from a DTCC perspective. I’d encourage folks to also participate in those.”
In the lead-up to the launch of T+2 in Australia and New Zealand, the focus will be on understanding and harmonising matching processes and minimising STP fail rates. Trade participants should be seeking to confirm on the trade date if possible, to streamline the downstream processes and give a time buffer to manage mismanaged trades, Chan says.
A second issue is around standing settlement instructions (SSI). In addition to same-day trade affirmation, one of the ways to minimise mismatches is to put SSI information into trades, he explains.
AFMA is calling on participants in Australia’s debt markets to attest to their readiness for T+2 by December, Chan said.
“They will need to say to AFMA that they’re ready to make the change in March,” Chan said. “AFMA is looking to be in the position to communicate that back to regulators to make sure that everyone is on the same page and comfortable.”
Singapore is considering a move to T+2 in 2016 as well, but there has been less communication from regulators there regarding that transition, Chan said. Japan is looking at transitioning to T+2 in 2017, he added.