Step 1: Trade
Trades executed on ASX Trade or the trading platform of an Approved Market Operator (AMO), are sent to ASX Clear for registration.
Step 2: Novation and clearing
Once accepted by ASX Clear, each cash market transaction or derivatives market contract is novated – replaced with two separate transactions or contracts between the clearing participants and ASX Clear as the Central Counterparty (CCP). However, if a trade is cleared on both sides by the same clearing participant, there is no need for novation and ASX Clear simply notifies the participant of the trade.
At the end of the trading day, ASX Clear nets all cash CCP transactions to create one net receipt or delivery per line of stock and one net cash payment or receipt per clearing participant. Generally, if a stock is undergoing a corporate event, the netting facility is turned off and the gross transaction is retained through to the settlement cycle.
Step 3: Settlement
The resulting transactions are sent to ASX Settlement for settlement in CHESS on the morning of T+2.