The settlement system and electronic securities depository for all cash equities traded in Australia is ASX Settlement.
As at the end of December 2016, $1.77 trillion of securities were held in CHESS across 2,037,933 holders and 13,095,350 holdings.
Settlement is conducted through the Clearing House Electronic Sub-register System (CHESS), which operates a Model 3 Delivery versus Payment (DvP) multilateral net batch settlement mechanism, exchanging cash for securities irrevocably.
CHESS also registers the title (ownership) of shares on its sub-register. Both this sub-registry service and the fact that it is included within standard settlement fees are unique to Australia.
The sub-registry service provides key benefits to brokers, investors and issuers:
- For brokers, it reduces risk in facilitating settlement through expediting both the movement of securities in preparation for settlement and the timely allocation of shares to client accounts post settlement. It also enables them to provide a value-add service to investors by managing all of an investor's shareholdings in a single account. Because registration is held within the CHESS system, brokers can also do this without any additional system development.
- For investors, it has the advantage of simplifying the administration of a portfolio by consolidating all shareholdings into a single account. It also provides investors with confidence that their holdings are only transferred by their broker on receipt of proper instruction from them. The CHESS system also produces holding statements which independently confirm their share purchases, sales, transfers and holdings. Finally, the CHESS system retains investor details for use in subsequent transactions.
- For issuers, in addition to providing a cost effective manner to maintain a register of shareholders, the sub-register also provides an efficient and accurate mechanism to process corporate actions.
ASX Settlement is a licensed clearing and settlement facility under the Corporations Act, and must comply with the Financial Stability Standard (FSS) for Securities Settlement Facilities published by the Reserve Bank of Australia. In addition, as a clearing and settlement facility licensee, it must:
- do all other things necessary to reduce systemic risk
- to the extent that it is reasonably practicable to do so, do all things necessary to ensure that the facility's services are provided in a fair and effective way
- have adequate arrangements for supervising the facility.
The ASX Settlement Operating Rules form the contract between ASX Settlement and its settlement participants.
Legal terms of service are in place between ASX Settlement and Approved Market Operators and Approved Listing Market Operators.