Australia, NZ Seen Switching to Next-Day Settlement by 2030

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Or sign-in if you have an account.(Bloomberg) — New Zealand and Australia are expected to join a global transition to next-day settlement of stock transactions within five years, once key clearing and settlement systems are ready, according to a senior banker.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountAustralia may make the transition as soon as 2030, assuming ASX Ltd. meets its target of completing its rollout of its settlement platform CHESS in 2029, said Michele Pitts, global product head for transaction management at Citi Investor Services in New York. New Zealand would be expected to move at the same time given the interconnection of the two markets, she said.The switch to what’s known as T+1 is gathering pace after the US, Canada and Mexico became the first to adjust in 2024, with the UK and Europe committed to change in October 2027, while South Korea and other Asian nations have begun exploring their options. The uneven pace of the transition is putting pressure on investors based in markets that have two-day, or T+2, settlement when they want to deal in a T+1 market.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try again“All of this becomes easier when everyone’s on a common settlement date,” Pitts said in an interview in Wellington during a visit to discuss T+1 with clients. “At some point, ultimately all of the markets will move just because it creates a better ecosystem for all of the parties to transact.”For now, that ecosystem is divided, presenting a challenge for investors who operate in a two-day settlement system when they transact in the US, or, from next year, Europe and the UK. Aspects of the trading process — such as affirmation and recalling securities out on loan — must happen at least twice as fast. Global funds face a mismatch where cash flowing in and out moves at a different speed to the assets they have to buy and sell.More countries now want to understand the T+1 transition, Pitts said.“A lot of the different exchanges and depositories are on a circuit to understand what took place in the US and what’s happening in Europe,” she said. They want to know the amount of time it took, what regulators and market participants were involved, how did they do it and what are the steps that they need to think about if they were to follow, she said.The ASX didn’t immediately respond to a request to comment. NZX is monitoring global progress toward T+1 settlement and is in regular contact with ASX on the topic, a spokesman said.“Alignment across New Zealand and Australia will be an important consideration, including for settlement processes and corporate action timetables,” the spokesman said. “We have had initial discussions with market participants and have a broad understanding of the changes that would be required. No decisions have been made.”Pitts said with 15 months to go before the Europe and UK switch, clients she has met in Japan and Australia have been able to leverage their experience from the US transition and are well prepared. This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.“They’re not starting from square one and they have a clear path forward,” she said. “Unlike the US where people were looking around in shock as you’re speaking, everyone was very much aware of what was taking place.”Still, with the reduced time to carry out all aspects of a trade, including the foreign exchange leg, there will be increased pressure on systems, which will lead to more use of custodial services and automation, she said. That means market participants need to engage with their service providers, brokers and counterparties to identify their “pain points” and design solutions, Pitts said. There must also be an eye to the future.“Even if you weren’t exposed to the US and this is your start of your journey, there’s still the rest of the world,” she said. The question should be ”how can I future proof what I’m doing so it’s scalable for global T+1 and beyond.”Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.