T+1 Settlement Cycle

What is T+1 settlement cycle?

Australia's cash equity market utilises the Clearing House Electronic Subregister System (CHESS) for clearing and settlement. Currently, trades settle on a T+2 basis, with securities transactions completing two business days after the trade date.  

References to a potential move to T+1 settlement for the Australian cash equity market means settlement one business day after the trade date (T) (that is, T+1 is trade date plus one business day).

A move to shorter settlement cycles across the globe has been driven by a variety of stakeholders, including financial market intermediaries, regulators, governments and impacted participants.  Global literature cites potential benefits of settlement cycle compression which can be broadly grouped as risk reduction, enhanced operational efficiency, and advantages for stakeholders.

Implementing and sustaining faster settlement cycles, such as T+1, entails various risks, costs and challenges, impacting stakeholders differently, compounded by challenges associated with global time-zones. These challenges include transition costs, capital expenditure, potential investor costs, and the emergence of new (and sometimes unintended) risks.

T+1 whitepaper

On 23 April 2024, ASX published an industry whitepaper following on from the establishment of the T+1 working group. The ASX Business Committee formed the T+1 Working Group in December 2023 to provide analysis and insights to the Business Committee on settlement cycle compression. Working group members have provided input into this paper. The paper Considerations for accelerating cash equities settlement in Australia to T+1 explores strategic considerations for a potential transition to T+1.

Stakeholders were encouraged to provide written feedback by 18 June 2024 via Qualtrics. Feedback will be compiled and shared where appropriate. ASX will aim to publish a summary of feedback in August 2024.

Stakeholder engagement

T+1 Working Group

In December 2023, ASX established the T+1 Working Group, comprised of volunteers from the ASX Business Committee. The purpose of the T+1 Working Group is to carry out focused analysis and to provide insights to the ASX Business Committee on settlement cycle compression. The Working Group is not a decision making forum and will report to the ASX Business Committee on its deliberations.

• Initially, the T+1 Working Group has been tasked to consider the case for and against shortening the settlement cycle in the Australian cash equities market and prepare a document for public release (‘Whitepaper’) for the purpose of soliciting the views of a broad range of stakeholders. The focus of the Whitepaper is on strategic considerations which should be taken into account in forming a view on whether shortening the settlement cycle promotes the interests of the Australian market as a whole.