Default Management Overview

Purpose

This document provides information on some of the functionalities within the system that may be used by Central Counterparties (CCPs) and Settlement Facilities (SFs) in managing a default of a participant. It links to other technical documents that outline in greater details the functionalities available, including:

  • Back-out Algorithm

  • Payment Provider Default

  • Successful Transfer of Funds

  • Rejection of mFund Payment Facility

  • ASX Initiated Transfer of Settlement Instructions

Note that this document is not intended to provide a comprehensive overview of the steps taken by ASX in a default event.

Back-out Algorithm

Payment Provider Default

In the scenario where a Payment Provider defaults and funds cannot be moved by the payment service (RITS), the CSP will invoke the cancellation of batch settlement. Refer to Cancellation of Batch Settlement Process.

Successful Transfer of Funds

Once the funds are successfully moved by the payment service (RITS), refer to Batch Settlement Funds Movement Process, the CSP will complete batch settlement as per normal processing. Refer to Movement of Units Process.

Rejection of an mFund Payment Facility

In the scenario where a Payment Provider rejects the funds obligation of a Payment Facility with a sub-type of ‘mFund Application’ or mFund Redemption', the CSP will identify all mFund Orders and reschedule them to the next settlement date.

Where the Payment Facility belongs to a Settlement Participant, all mFund Applications relating to the rejected Payment Facility will be rescheduled.

Where the Payment Facility belongs to a Product Issuer Settlement Participant (PISP), all mFund Redemptions relating to the rejected Payment Facility will be rescheduled.

For each mFund Application and/or mFund Redemption that is rescheduled, the CSP generates a mFund Order Status Notification (mfnd_402) to both the Settlement Participant and PISP.

Once all orders have been rescheduled, the CSP will recalculate funds obligation and advise both Participants, PISPs and Payment Providers of the revised Funds Obligation.

ASX Initiated Transfer of Settlement Instructions

ASX Clear / ASX Operations have the ability to transfer Settlement Instructions between Participants for default management purposes. Refer to ASX Initiated Settlement Instructions Transfer Process.