For approved financial products, CHESS routinely receives notifications of the relevant details of corporate actions from ASX Reference Point ISO 20022. Information disseminated from ASX Reference Point ISO 20022 triggers the creation of the relevant corporate action event in CHESS and the processing of events.
Participants can obtain corporate action details either directly from ASX Reference Point ISO 20022 or from other service providers. CHESS provides no market announcement facilities.
The following table provides details as to the corporate action event type and corporate action event numbers (option number) disseminated via corporate action event notifications and required for inclusion when processing corporate actions through CHESS. Additionally, it outlines the applicable corporate action option type, holding adjustment reason and bid transfer reason codes for each corporate action.
* - Applicable for the removal of securities where the capital repayment is a final payment and the securities cease to exist as a result of this payment.
10.1.1 - The Ex Period
The ex period for a corporate action means the period from the start of day on the ex date to end of day on the record date.
The ex date is the date on which the basis of quotation for a financial product changes to signify that trading in that financial product no longer carries the entitlement to a corporate action. Up to three basis of quotations can be recorded against a market trade. An ex basis of quotation remains for the market trade until the corporate action is complete. The current ASXS regime for approved financial products is a two business day settlement period and a two business day ex period for corporate actions. Should there be an exception to the two business day ex period, it must be reflected in the market announcement and is included in ASX Market Data.
The record date is the date determined by the issuer as the date for identifying security holders entitled to the benefit of a corporate action. Transactions must be completed by this date in order for holders to be identified on the register of members as being entitled to the benefit of a corporate action.
During the ex period, CHESS maintains a separate cum entitlement balance (CEB) for each holding and only cum transactions (+/-) are applied to the CEB.
For all transactions conducted during the ex period, CHESS will apply a basis of movement (BOM) in accordance with default BOM designations. Consequently, Participants are not required to enter an override BOM unless the basis required is contrary to the default BOM. Refer to section 10.1.2 for further details.
On record date, the issuer uses the CEB to determine the entitlements of the corporate action. Financial products are available for delivery on a cum entitlement basis only if there is a sufficient CEB for the holding. All financial products in the holding are available for delivery on an ex settlement basis.
The ex period can be summarised as follows:
Last cum quote
1st ex quote
Create cum entitlements.
CHESS maintains cum entitlement balances
Transactions may be settled cum or ex
Most cum transactions settle
CHESS sends cum entitlement balance information to the registry during the ex period until end of day on record date. The final cum entitlement balance is as at End of Day on Record Date.
Both CHESS and issuer-sponsored subregisters provide for the concurrent registration of cum and ex transactions during an ex period. All transactions are designated as either cum or ex during the ex period by way of CHESS default BOM processing or participant initiated BOM overrides.
The following table shows the default BOM applied by CHESS in the absence of a participant initiated override, during the ex period. CHESS will apply the default BOM in the absence of a participant initiated override during the ex period. Where a settlement participant includes an override BOM on an applicable message type, then the BOM implied by the override BOM field is applied to the transaction and not the default value.
Therefore, it is not necessary for a participant to include an override BOM unless the action required is contrary to the BOM defaults within CHESS.
Additional details on dividend reinvestment and bonus share plan elections will be made available in a subsequent release.
10.1.3 - Deferred Settlement
ASXS may establish a deferred settlement market as a result of a corporate action. Deferred settlement trading is a common component of corporate actions and is provided for under the ASX Listing Rules and Timetable Appendices for most events, i.e. calls and instalments, conversion or expiry of convertible securities, bonus issues, entitlement offers and reorganisations of capital (reconstructions).
The purpose and rationale of deferred settlement trading is to provide a market whereby a security holder may trade from the commencement of an effective date or ex date during the course of an event up until such a time where the resultant securities are issued or reconstructed.
As a consequence, market liquidity is maintained in the parent security in addition to providing a market for entitlement trading at the earliest possible time and in conjunction with any market price adjustment that may occur.
CHESS calculates the settlement date for market trades executed within the deferred settlement period, equating to the issue date plus three business days.
10.1.4 - Subregister Movements Approaching Record Date
During the ex period, CHESS BOM defaults apply to movements to/from the CHESS subregister; alternatively participants may opt to apply BOM overrides where appropriate.
Participants moving financial products between subregisters when a record date is approaching should ensure that the transfer or conversion request is submitted at the earliest opportunity to allow for the issuer’s (registry's) prescribed turnaround time.
CHESS rejectscum or ex designated transactions (where a BOM override is applied by the participant) if those transactions are submitted outside the ex period.
During the ex period registries may nominate holding adjustment movements and securities transformations as ex or cum; alternatively, registries may opt to use CHESS BOM defaults.
10.1.5 - Isolate Counterparty
When a novated settlement obligation fails settlement the isolate counterparty process can be initiated to request isolation of a number of units. The purpose of isolating units is typically to enable the receiving participant to request protection of a non-default benefit for a corporate action from the delivering participant who has failed to deliver. Refer to section 9.1.16 for further details.
10.1.6 - Financial Product Movement Reasons
CHESS holding statements issued to holders provide a description for each movement to or from a CHESS holding. There are several reasons why financial products are moved within CHESS. Some are effected by controlling participants (e.g. CHESS to CHESS transfers). Others are issuer (registry)-initiated movements arising from corporate actions. When an issuer (registry) sends a movement transaction to CHESS, they include an indicator to denote the reason why the movement took place. Refer to ‘MovementReason' in theProprietary Code List for a list of reasons.
10.2 - Diary Adjustments
In the majority of cases where a buyer has purchased securities on a cum entitlement basis, settlement occurs on or before record date, thus the cum entitlement transaction is registered and eligible to receive the entitlement to a corporate action event. At record date, the issuer (registry) determines the security holders that will receive an entitlement. If a cum entitlement buyer is not registered by end of day on record date, they would ordinarily need to claim their entitlement from the seller, who despite no longer being entitled, remains the registered owner of the securities on the record date. Should a transaction fail to settle by end of day on record date, a process is applied to adjust outstanding settlement instructions. This process is referred to as a diary adjustment.
In applying automatic adjustments, CHESS calculates the entitlement (cash and/or securities) due on the outstanding cum transaction to the buyer or the new obligations (accruals) due from the buyer. Where a security entitlement is due to the buyer, CHESS creates an accrual settlement instruction (on a free of payment basis) as an outstanding settlement instruction in the resultant securities. Where a value adjustment is due to the buyer, CHESS adjusts the parent transaction to reflect the value adjustment
10.2.1 - Automatic Diary Adjustments
Automatic diary adjustments are triggered in CHESS at end of processing on Record Date and may come in four classes:
Value Adjustments - which adjust the value of a settlement instruction;
Non-value transactions (securities movement only) do not have value adjustment accruals applied.
Restructure Adjustments - which adjust the securities of a settlement obligation (e.g. split and consolidation/warrant rollover);
Accrual Adjustments - which create a new accrued obligation on a free of payment basis (e.g. bonus issues and entitlement offers); and
Security Code Changes - gives effect to a code change; updating settlement instructions and holdings (refer to section 10.3).
Depending on the diary adjustment being performed, CHESS will notify of the diary adjustment by sending an Adjusted Settlement Instruction (sett_139) or Accrual Settlement Instruction (sett_140) with the diary adjustment type:
Diary Adjustment Type
Diary Adjustment Class
Diary Adjustment Type
Diary Adjustment Class
Code Change Diary Adjustment (CCDA)
Security Code Changes
Occurs during a security code change event. CHESS changes the Security Code and ISIN against settlement instructions, typically for a class merger where a deferred trading code is merged with the parent code.
Bonus Diary Adjustment (BNDA)
Occurs during a bonus event where there is failure to deliver cum units subject to a bonus issue by end of day on record date. CHESS creates a free of payment accrual s per the ratio of bonus securities to outstanding units.
The parent transaction and accrual settlement instruction are then treated as independent transactions for settlement purposes.
Consolidation Diary Adjustment (CODA)
Occurs during a reconstruction/warrant rollover event where all outstanding instructions are adjusted at end of day on record date for the Reconstruction/warrant rollover to account for the new formula, and modified to a deferred security code.
Dividend Diary Adjustment (DVDA)
Occurs during a dividend payment event where there is failure to deliver cum units subject to a dividend by end of day on record date. CHESS adjusts the settlement amount by the dividend amount per outstanding unit.
CHESS does not make automatic adjustments for trusts that do not declare a distribution amount until after the record date; but will apply the adjustment using an estimated rate if it is announced before record date. Should a claim be necessary these should be made outside CHESS.
Interest Diary Adjustment (INDA)
Occurs during an interest payment event where there is failure to deliver cum units subject to an interest payment by end of day on record Date. CHESS adjusts the settlement amount by the interest payment amount per outstanding unit.
Application Money Diary Adjustment (AMDA)
For non-renounceable rights entitlements, three business days prior to the applications close date, CHESS automatically adjusts any outstanding cum entitlement transactions for the applicable application money.
For renounceable rights entitlements CHESS adjusts the settlement amount to account for the application monies to be paid by the seller at end of day applications close.
Non-Renounceable Rights Diary Adjustment (NRDA)
Occurs during a non-renounceable rights issue event where there is failure to deliver cum units subject to a rights issue by end of day on record date. CHESS creates an accrual settlement instruction to deliver the resultant security.
In the case of an attaching option, an additional accrual settlement instruction for the option security is created by CHESS for all outstanding accrued obligations at end of day on Applications Close.
This type of Diary Adjustment may be used to adjust for attaching option diary adjustments.
Renounceable Rights Diary Adjustment (RRDA)
Occurs during a renounceable rights issue event where there is failure to deliver cum units subject to a rights issue by end of day on record date. CHESS creates an accrual settlement instruction to deliver the rights security.
In the case of an attaching option, on failure to deliver the rights security by end of day on applications close, CHESS creates an accrual settlement instruction for the option security.
This type of diary adjustment may be used to adjust for attaching option diary adjustments.
Split Diary Adjustment (SSDA)
Occurs during a security split event. All outstanding instructions are adjusted at end of day on record date for the Reconstruction to account for the new formula, and modified to a deferred security code.
Capital Return Diary Adjustment (CRDA)
Occurs during a capital repayment event where there is failure to deliver cum units subject to a capital return by end of day on record date. CHESS adjusts the settlement amount by the capital return amount per outstanding unit.
Call Diary Adjustment (CLDA)
Occurs during a call event where there is failure to deliver partly paid securities by end of day on the record date. CHESS adjusts transactions to account for the monies to be paid by the seller and modifies to security code to the call paid security.
Diary adjustments are applied to the partly paid securities of a limited liability. The holder of the partly paid securities of a limited liability company has a legal obligation to pay the call. Where a call dairy adjustment has been applied to a settlement instruction, the seller should claim the adjustment amount from the buyer.
Diary adjustments are not applied for no-liability companies. Participants must make their own arrangements regarding the protection and payment of a call on no-liability companies and the subsequent settlement of the call paid securities.
Where a transaction fails to settle on the last business day, ASXS will process transfers before a call for a no-liability company and both participants must agree that settlement will be effected by a transfer of the resultant securities.
The settlement instructions should be cancelled by the participants and replaced with new settlement instructions with the revised details to reflect the number and class of financial products that are to be transferred as a result of the call.
On announcement of a corporate action event by an issuer, CHESS records the event and on the record date, initiates the Diary Adjustments Process, determining the appropriate diary adjustment for all outstanding cum transactions in the parent security for:
Renounceable and non-renounceable rights issues; and
Reconstructions (split or consolidation).
Refer to the table above for the associated adjustment type.
Where the diary adjustment results in a value adjustment for capital returns, dividends, distributions and interest payments, CHESS adjusts the parent transaction to reflect the value adjustment owed to the buyer.
Where the diary adjustment results in a value adjustment for renounceable and non-renounceable rights offers and call payments, CHESS adjusts the parent transaction to reflect the value adjustment owed by the buyer.
For accrual adjustments CHESS determines the settlement date for the accrual settlement instruction or adjusted transaction according to the issue date for the new securities plus three business days. The accrual settlement instruction or adjusted transaction may be created in the deferred settlement securities or new securities. As necessary, CHESS makes a further diary adjustment to change the code on issue date plus one business day (refer to section 10.3).
For non-renounceable rights entitlements, three business days prior to the applications close date, and for renounceable rights entitlements CHESS adjusts the settlement amount to account for the application monies to be paid by the seller at end of day applications close date.
In the case of an attaching option, an additional accrual settlement instruction for the option security is created.
As a result of the diary adjustment for a renounceable or non-renounceable rights offer, the seller will pay the application monies to the issuer (registry). The buyer will reimburse the seller for the application monies due.
Following notification of the adjusted transaction or accrual obligation through the Diary Adjustments Process, the participant updates their records.
In the event the issue date is moved to a later date, and therefore the first settlement date for the new securities is moved to a later date for an adjusted transaction or accrual settlement instruction, CHESS notifies the participants with a rescheduled settlement instruction for the adjusted transaction or accrual settlement instruction through the Settlement Instruction Rescheduling Process.
The participants then update their records and proceeds to settlement of the adjusted transaction or accrual settlement instruction on the amended date.
10.3 - Security Code Changes
Security code changes may occur:
when a company changes its name and/or ASX security code; or
as a result of a corporate event process; for example as a result of a merger.
Code Change and Class Merger Lifecycle (Process Flow)
The following lifecycle provides an overview of the key events for a code change or class merger and approximate times after announcement that these events occur. More detailed procedures are provided in subsequent sections.
10.3.1 - Security Code change
Where a company name change gives rise to a change in Security Code for securities issued by that company. CHESS effects a code change for existing holdings and associated subpositions on the CHESS subregister along with any unauthorised registry/CHESS movement requests and settlement instructions and notifies the initiating participant of the change. CHESS will adjust these outstanding transactions to reflect the code change.
10.3.2 - Security Code Changes - Class Mergers
Class mergers are effected when an issuer merges one security code with another when the securities rank equally. This results in existing holdings being merged into a new security. CHESS will update any settlement instructions and holdings (where holdings exist, including subpositions) to the new code, the merged code will be delisted and the subregister closed (refer to section 10.6).
The code change is effected by start of day on the business day following the record date and CHESS only notifies the issuer (registry) and participants with holdings in their account (HIN).
10.3.3 - Processing a Security Code Change or Class Merger
This procedure applies generally across the security code change and class merger concepts covered in this section.
After the completion of all transaction processing on the business day prior to the effective date for a security code change or class merger, CHESS adjusts the outstanding transactions to reflect the code change through the Code Changes Process or Class Merger Process.
For security code changes, CHESS applies the Code Change Diary Adjustment (CCDA) to change the Security Code and ISIN against settlement instructions and holdings.
For class mergers, CHESS applies the Code Change Diary Adjustment (CCDA) to change the Security Code and ISIN against settlement instructions and holdings (where holdings exist).
On receipt of notification of code change or class merger, the participant should update their records.
10.4 - Effect on Subpositions - Reconstructions
CHESS enables an issuer (registry) to reconstruct and where authorised, increase or decrease the holding balance of a security on an account (HIN). A reconstruction affects existing holdings and associated subpositions on the CHESS subregister.
The issuer (registry) effects a holding adjustment through the Holding Adjustments Process with the reason code Share Split (SPLF) or Share Consolidation (SPLR).
CHESS proportionally adjusts subpositions for security reconstruction transactions (consolidations and splits) to maintain the existing relationship between the holder and the third party.
10.5 - Suspension of a CHESS Subregister
Corporate events such as a reconstruction will automatically result in CHESS suspending a subregister from participant activity.
Suspended subregisters may also be re-opened. For example, a suspension being lifted during the processing for a reconstruction would result in CHESS re-opening the subregister at the reconstruction issue date plus one business day.
CHESS continues to maintain subpositions after the subregister is suspended. However, a holding’s financial products are not available to the security holder whilst the subregister is suspended.
10.6 - Closure of a CHESS Subregister
As a result of certain corporate events (e.g. final settlement for nil paid rights, maturity of capital notes etc) or where ASXS determines to suspend or revoke approval of a class of an issuer’s financial products in accordance with ASX Settlement Operating Rule 8.4.1, ASX Operations or CHESS will close the subregister to all activity.
If there is no diary adjustment coinciding with the subregister closure and some settlement instructions remain (e.g. where settlements have been part settled, suspended or rescheduled), CHESS will change the status of the settlement instruction from scheduled to suspended. Refer to Settlement Instruction Suspension for further information.
Following a subregister closure, CHESS cancels any transactions awaiting a matching entry through the relevant Housekeeping process.
The subregister will not be archived where there are any accounts (HINs) with a holding balance that is greater than zero or there are current corporate actions for the security.
10.7 - Late Company Notice of a Corporate Action
There have been instances where an issuer has failed to advise the ASX of a corporate action until after the record date has passed. When this occurs, the following apply:
A CHESS corporate action is not established;
A CHESS ex period is not established;
Cum entitlement balances are not created;
CHESS diary adjustment processing cannot be performed; and
Participants are not given the opportunity to supply an override basis of movement so all movements are treated as cum entitlement movements.
To verify holder entitlements, participants should use holding balances generated through the Holding Balance (HBAL) as at the record date.
10.8 - Franking Credits
CHESS facilitates the passing of franking credits (known as imputation credits) where the transaction relates to a cash CCP transaction.
If the parent market trade does not settle in full, or in part, by the end of day on the record date for the corporate action, and participants wish to claim franking credits on behalf of an Australian resident for income tax purposes, they should contact ASX Operations.