Batch Settlement Overview

The CSP implements a batch settlement process to perform Delivery vs. Payment (DvP) (Basel settlement type 3) for all Settlement Instructions with a settlement date of the current business date, and to process payment for all mFund Orders with a Payment Date of the current business date. Settlement instructions/mFund Orders can be any of the following.

Batch settlement is initiated at approximately 11:30am AEST/AEDT on each business date.

Once initiated, the CSP identifies all settlement instructions/mFund Orders that are due to be settled for the current business date using the following criteria:

• Settlement instructions scheduled with a settlement date of the current business date;
• Settlement instructions that have previously failed settlement (in part or in full) and were rescheduled to the current business date; and
• mFund Application Order Requests and mFund Redemption Order Requests with a payment date of the current business date.

The process flow below outlines the main processes covered in this functional specification:

1. CDE 10 - Sufficient Unit Check Process;

2. CDE 10 - Non-Novated Settlement Obligations Process (where applicable);

3. CDE 10 - Novated Settlement Obligations Process (where applicable);

4. /wiki/spaces/CSP/pages/86675272;

5. /wiki/spaces/CSP/pages/499384492 (where applicable);

6./wiki/spaces/CSP/pages/313393513;

7. CDE 10 - Cancellation of Batch Settlement Process (where applicable).

8. CDE 10 - Movement of Units Process;

9. /wiki/spaces/CSP/pages/245238519

10. CDE 10 - Settlement Notifications and Completion Process; and

11. /wiki/spaces/CSP/pages/67831215 (where applicable).

Validations of Settlement Instructions/mFund Orders

The CSP performs a number of validations on settlement instructions that are due to be settled on the current business date. The table below summarises these validations and explains the actions taken by the CSP where the validations are not successful.

For validations performed on mFund Orders that are due to be settled on the current business date, refer to /wiki/spaces/CSP/pages/245435095.

Settlement instructions/mFund Orders that are rescheduled or suspended are not further evaluated by the CSP in the current settlement cycle.

Treatment of Novated Settlement Instructions

For efficiency purposes, the CSP will assess the eligibility of all NGMTs scheduled for settlement for the current business date as a single delivery or receipt position (units and funds) for each Settlement Entrepot account to/from the Central CounterParty (ASX Clear), Security Code and Basis of Movement combination.

The delivery or receipt position which is calculated by the CSP will be referred to as the Novated Net Delivery Position (NNDP). 

Once the NNDP has been calculated, the underlying NGMTs will not be further assessed for settlement by the CSP.

Overall Net Delivery Position

In addition to the NNDP, for each Account (HIN), Security Code and Basis of Movement combination, the CSP will determine the units the Account (HIN) is expected to deliver or receive. This delivery or receipt position takes into consideration all types of settlement instructions (excluding mFund Orders) that are scheduled for settlement (which were not incorporated into the NNDP) for the current business date.

Basis of Movement / Cum Entitlement Balances

Where the security is subject to a corporate action and the entitlement is required to be moved with the parent security (the Basis of Movement is “Cum”), the CSP will also calculate a delivery or receipt position for the Cum Entitlement Balance (CEB). 

Sufficient Unit Check

For each delivery position (where the account is expected to deliver units), the CSP will check if there is sufficient available holding balance in the Account (HIN) for the security and Cum Entitlement Balance (CEB) (where applicable).

Accounts (HINs) identified with an insufficient available holding balance will have a /wiki/spaces/CSP/pages/115017883 imposed.

Settlement Algorithm

Where the CSP has identified an Account (HIN) with an available holding balance less than the calculated overall net delivery position, the CSP will initiate the settlement algorithm. The purpose of the settlement algorithm is to determine the possible downstream settlement instructions impacted by this shortfall. The CSP evaluates settlement instructions based on three key principles: 

1. maximise the number of units settled; 
2. maximise the amounts of funds settled; and
3. minimise the number of Settlement Participants impacted. 

Considerations taken into account for settlement instructions by the settlement algorithm include:

• Part Settlement - whether the settlement instruction is eligible for part settlement
• Settlement Linking - where settlement instructions have the same settlement link Id
• Previous fails - number of occurrences the settlement instruction has been rescheduled (in part or in full) previously

When performing the assessment, the NNDP is assessed by the algorithm rather than the underlying NGMTs. 

Where the settlement algorithm has elected to fully fail a non-novated settlement instruction (BSSI, USSI, GMT (non-novated)), the CSP will reschedule the settlement instruction to the next business date. 

Where the settlement algorithm has elected to fully fail or part settle an NRI the CSP is required to calculate an SSP adjustment which is to be settled in the current batch settlement cycle. Refer to 82183950 for further information. 

Where the settlement algorithm has elected to fully fail or part settle an NNDP, for the failing part of each NNDP the CSP will create an:

• NSF:
• Captures / represents the aggregate number of units failed (in part or full) for the NNDP for settlement on the current business date.
• NRI:
• Aggregates the number of failed units (in part or full) for the NNDP rescheduled for settlement on the next business date.

Additionally, where an NNDP has failed settlement (in part or full), the CSP must calculate an SSP adjustment on the failing part of the NNDP which is to be is to be settled in the current batch settlement cycle. Refer to 82183950 for further information. 

Standard Settlement Price (SSP)

A Standard Settlement Price (SSP) adjustment is calculated for novated settlement instructions that won’t be settled in full in the current batch settlement cycle. The SSP adjustment is used by the CSP to ensure ASX Clear / ASX Settlement remains in a net zero position and is not required to fund settlement for the current business date. 

For a worked example, refer to the 82183950 section

Aggregate Funds Obligation

Once the CSP has identified all settlement instructions that are to be settled and mFund orders due for payment for the current business date, the funds obligation is calculated for each payment facility. Both the Settlement Participant and their Payment Provider are notified of the funds obligation to be either paid or received for a specified payment facility. Where the Settlement Participant is required to pay funds, the Payment Provider must provide authorisation. Refer to /wiki/spaces/CSP/pages/86675272 for further information.

The funds obligation amount calculated by the CSP incorporates the following settlement values:

• The net of all Settlement Amounts of settlement instructions that are due to fully settle;
• The net “prorated” Settlement Amount of settlement instructions that are due to partially settle;
• The net of SSP adjustments calculated for novated settlement instructions (NNDP and NRIs) that will fail to settle in part or full;

• The net of all Settlement Amounts of mFund Application Order Requests that are due for payment; and

• The net of all Settlement Amounts of mFund Redemption Order Requests that are due for payment.

The net trust amount calculated by the CSP incorporates the following trust values:

• Trust amounts for USSI settlement instructions that are due to be fully settled

The following table summarises the amounts calculated and included on the notifications to Settlement Participants and Payment Providers.

When the CSP receives authorisations for all payment notifications, the payments service step of Batch Settlement will be invoked.

Update of Holding Balances and Settlement Instruction

Once the CSP is notified of the successful transfer of funds by the payment service, the following actions are performed by the CSP:

• Holding balances of delivering and receiving Accounts (HINs) are updated per the calculated aggregate delivery positions;
• Where settlement instructions are partially settled or fully failed, refer to CDE 10 - Sufficient Unit Check Process.

• Notifications are generated and sent to Settlement Participants advising of the Net Holding Movement and Funds Settled. Refer to CDE 10 - Movement of Units Process for further information.

• Notifications are generated and sent to Settlement Participants advising of the settled portion and rescheduled portion of the Settlement Instructions that have partially settled, and that Batch Settlement is complete. Refer to CDE 10 - Settlement Confirmation and Completion Process for further information.

• Notifications are generated and sent to Settlement Participants advising that payment is complete for mFund Application Order Requests. Refer to /wiki/spaces/CSP/pages/245238605 for further information; and

• Notifications are generated and sent to Settlement Participants advising that payment is complete for mFund Redemption Order Requests. Refer to /wiki/spaces/CSP/pages/245435016 for further information.

Standard Settlement Price (SSP) Examples

The Standard Settlement Price (SSP) is calculated on the NNDP where there is a position shortfall. The CSP uses the SSP to avoid ASX Clear / ASX Settlement from funding the settlement. The SSP will then be used to determine the Mark to Market Value of the failed portion of the NNDP. The SSP Adjustment is applied to the NSF and NRI which are created due to a failure of a novated position. 

SSP Examples

The section below provides an example of the use of an SSP in two different scenarios. The first table below outlines the sample set of settlement obligations used in the subsequent two scenario examples. Scenario 1 provides an example of a rising market scenario, where the valuation price is greater than the various average trade prices and scenario 2 provides an example of a falling market scenario, where the valuation price is lower than the various average trade prices.

Settlement obligations

The table outlines a set of underlying trades which are netted together for each Participant to form an NNDP that is used in the two subsequent scenarios.

Novated Net Delivery Positions (NNDPs)

As part of scheduled batch settlement, an NNDP is calculated consisting of NGMTs for each account, security code, and basis of movement combination. 

The table outlines the NNDP created based on the above settlement obligations.

Scenario 1: Rising Market Scenario

This table provides a scenario where the valuation price is greater than the average price of the obligation. The valuation price is $3.00.

As a result of the failure of the NNDPs, the CSP creates both an NSF and NRI which results in the following messages to each Settlement Participant. This is represented in the table below. 

Following the payment of funds, the table below outlines the Settlement Movement Confirmation (sett_136) messages sent to each Settlement Participant, incorporating the NSF created as a result of the settlement algorithm.

Scenario 2: Falling Market Scenario

This table provides a scenario where the valuation price is less than the average price of the obligation. The valuation price is $1.00

As a result of the failure of the NNDPs, the CSP creates both an NSF and NRI which results in the following messages to each Settlement Participant. This is represented in the table below. 

Settlement Cut-off Extension

Where ASX Operations are required to extend batch settlement cut-off (usually at 11:30am), the CSP will advise Participants (Clearing Participants, Settlement Participants, Payment Providers and Product Issuer Settlement Participants) using the Event Notification. The Event Notification will advise Participants of the updated settlement cut-off extension. Refer to /wiki/spaces/CSP/pages/499155181 for further information. 

Cancellation of Batch Settlement

Cancellation of Batch Settlement is facilitated in the CSP by ASX. Refer to CDE 10 - Cancellation of Batch Settlement Process for further information.