Batch Settlement Overview

Table of Contents


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.

TypeAttributes
Interposed (with the CCP)Part Settlement Eligible 
Gross Market Trades (GMT)Yes*Yes§
Bilateral Scheduled Settlement Instruction (BSSI)NoYes#
Unilateral Scheduled Settlement Instruction (USSI)NoYes#
Novated Rescheduled Instruction (NRI)YesYes§
mFund Application Order Requests~NoNo
mFund Redemption Order Requests~NoNo

Where the Part Settlement Indicator is provided as ‘PART’ the settlement instruction is eligible for part settlement. Where ‘NPAR’ is provided, the settlement instruction is not eligible for part settlement. 

* Where a security is eligible for novation the Central Counter Party (ASX Clear) is interposed with the buyer and seller of the Instruction (seller facing CCP and CCP facing buyer). Instructions for Securities that are not eligible for novation will not be interposed with the CCP and will remain bilateral (seller facing buyer directly).

§ Mandatory default setting.

The batch settlement process will only process payment of mFund Application and Redemption Order Requests but will not perform any movement of Fund units.

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. Sufficient Unit Check Process;

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

3. Novated Settlement Obligations Process (where applicable);

4. Funds Obligation Process;

5. Default Management Process (where applicable);

6. Batch Settlement Funds Movement Process;

7. Cancellation of Batch Settlement Process (where applicable).

8. Movement of Units Process;

9. mFund Application or Redemption;

10. Settlement Notifications and Completion Process; and

11. Change in Holding Balance (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.

Validation
Action
Delivering Accounts (HINs) must have an active status or locked status with a reason of deceased or bankrupt.

Where the Delivering Account (HIN) is active or locked with the reason of death or bankruptcy, all Settlement Instructions where the Account (HIN) is required to deliver units will remain scheduled for settlement in the current batch settlement cycle. 

Where the Delivering Account (HIN) is locked with the reason of Subject to Court Order, Non-specific or Action by ASX Operations, BSSIs, USSIs and Non-Novated Gross Market Trades (NNGMTs) where the Account (HIN) is required to deliver units will be rescheduled to the next settlement date.

Where an Account (HIN) is required to deliver units for an NRI, the account will be assessed by the Settlement Algorithm, resulting in the rescheduling of the NRI.

Where the Account (HIN) is required to deliver units for a Novated Gross Market Trade (NGMT), refer to Novated Settlement Obligation Process, the account will be assessed by the Settlement Algorithm resulting in the creation of a Novated Settlement Failure (NSF) and NRI.

Refer to Settlement Instruction Rescheduling Overview for further information.

The Security Sub-Register status must be open.

Where the Security has a Sub-Register Status of Closed, the CSP will change the status of the applicable BSSIs, USSIs, NRIs and NNGMTs from scheduled to suspended. Refer to Settlement Instruction Suspension for further information.

Where the Security has a Sub-Register Status of Suspended the CSP will reschedule the applicable BSSIs, USSIs, NRIs and NNGMTs from the current business date to the next business date.

Where the Security has a Sub-Register Status of Suspended or Closed the CSP will calculate the applicable NNDP for the NGMTs (refer to Treatment of Novated Settlement Instructions). The CSP will then create an NSF to replace each NNDP for the current Batch Settlement cycle, and an NRI to reschedule each NNDP for settlement on the next business date.

Refer to Settlement Instruction Rescheduling Overview and Sub-register Status for further information.

For validations performed on mFund Orders that are due to be settled on the current business date, refer to mFund Application & Redemption Rescheduling Overview.

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). 

NRIs are not included within the NNDP. These settlement instructions will be settled / part settled / failed on a line-by-line basis. 

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). 

The CEB cannot be moved without the parent security.

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 Batch Settlement Failure Levy 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 the SSP section 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 the SSP section  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. 

The SSP adjustment is the difference between the average price of the settlement instruction (or group of settlement instructions) and the valuation price used for the security.

For a worked example, refer to the SSP Examples 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 Aggregate Funds Obligation Process 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.

Amount calculatedRecipientType of notification
Net Funds ObligationSettlement ParticipantFor information only
Payment Provider

Where Settlement Participant is to pay funds, authorisation is required by the Payment Provider.

Where Settlement Participant is to receive funds, the notification is informational and the authorisation is optional for the Payment Provider.

Net Trust AmountSettlement ParticipantFor information only
Payment ProviderFor information only to instruct the Payment Provider to raise an internal transaction that is not receivable by or payable by the CCP.

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 Sufficient Unit Check Process.
  • Notifications are generated and sent to Settlement Participants advising of the Net Holding Movement and Funds Settled. Refer to 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 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 mFund Application - Acceptance and Settlement for further information; and

  • Notifications are generated and sent to Settlement Participants advising that payment is complete for mFund Redemption Order Requests. Refer to mFund Redemption - Accepted Redemption Orders & Unit Redemption 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. 

Mark to Market Value is the difference between the average price of the NNDP and the valuation price used for the security. 

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.

Obligation IdObligation TypeDelivering Participant Receiving ParticipantUnitsSettlement Amount
GMTANGMTParticipant A

CCP

15$30.00
GMT1-ANGMTCCP

Participant A

5$10.00
GMTBNGMTParticipant B

CCP

20$50.00
GMTCNGMTCCPParticipant C20$40.00
GMT1-CNGMTParticipant C

CCP

5$10.00
GMTDNGMTCCPParticipant D15$40.00

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.

Obligation IdObligation TypeDelivering ParticipantReceiving ParticipantUnitsSettlement AmountAverage Price
NNDP1NNDPParticipant ACCP10$20.00$2.00
NNDP2NNDPParticipant BCCP20$50.00$2.50
NNDP3NNDPCCPParticipant C15$30.00$2.00
NNDP4NNDPCCPParticipant D15$40.00$2.67


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.

ParticipantSettlement OutcomeDeliver or ReceiveUnits SettledCredit / Debit IndicatorCash Settled on UnitsSSPTotal Cash SettledRescheduled Settlement Amount
Participant A

Fully fails

Deliver (DELI)0

Receives (CRDT)

$0.00$10.00 DBITPays$10.00 DBITReceives$30.00 CRDT
Participant B

Fully settles

Deliver (DELI)20

Receives (CRDT)

$50.00-Receives$50.00 CRDT--
Participant C

Fully settles

Receive (RECE)15

Pays (DBIT)

$30.00-Pays$30.00 DBIT--
Participant D

Partly settles

Receive (RECE)5

Pays (DBIT)

$13.33$3.33 CRDTPays$10.00 DBITPays$30.00 DBIT

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. 

AttributeParticipant A

Participant D

Messagesett_130sett_130sett_130sett_130
Obligation IdNSF1NRI1NSF2NRI2
Settlement Transaction ConditionNSFINRINNSFINRIN
Settlement DateCurrent business dateNext business dateCurrent business dateNext business date
Securities Movement TypeRECEDELIDELIRECE
Unit Quantity10101010
Settlement Amount$30.00$30.00$30.00$30.00
Settlement Amount Credit/Debit IndicatorDBITCRDTCRDTDBIT
SSP Adjustment$10.00-$3.33-
SSP Adjustment Credit/Debit IndicatorDBIT-CRDT-

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.  

AttributeParticipant AParticipant BParticipant CParticipant D
Messagesett_136sett_136sett_136sett_136
Movement TypeNETTNETTNETTNETT
Short Long IndicatorLONGSHORLONGLONG
Settled units020155
Value of units settled$10.00$50.00$30.00$10.00
Value of units settled Credit/Debit IndicatorDBITCRDTDBITDBIT
Number of Settlement Obligations3122

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

ParticipantSettlement OutcomeDelivering or ReceivingUnits SettledCredit / Debit IndicatorCash Settled on UnitsSSPTotal Cash SettledRescheduled Settlement Amount
Participant A

Fully fails

Deliver (DELI)0

Receives (CRDT)

$0.00$10.00 CRDTReceives$10.00 CRDTReceives$10.00 CRDT
Participant B

Fully settles

Deliver (DELI)20

Receives (CRDT)

$50.00-Receives$50.00 CRDT--
Participant C

Fully settles

Receive (RECE)15

Pays (DBIT)

$30.00-Pays$30.00 DBIT--
Participant D

Partially settles

Receive (RECE)5

Pays (DBIT)

$13.33$16.67 DBITPays$30.00 DBITPays$10.00 DBIT

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. 

AttributeParticipant A

Participant D

Messagesett_130sett_130sett_130sett_130
Obligation IdNSF3NRI3NSF4NRI4
Settlement Transaction ConditionNSFINRINNSFINRIN
Settlement DateCurrent business dateNext business dateCurrent business dateNext business date
Securities Movement TypeRECEDELIDELIRECE
Unit Quantity10101010
Settlement Amount$10.00$10.00$10.00$10.00
Settlement Amount Credit/Debit IndicatorDBITCRDTCRDTDBIT
SSP Adjustment$10.00-$16.67-
SSP Adjustment Credit/Debit IndicatorCRDT-DBIT-
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.  
AttributeParticipant AParticipant BParticipant CParticipant D
Messagesett_136sett_136sett_136sett_136
Movement TypeNETTNETTNETTNETT
Short Long IndicatorLONGSHORLONGLONG
Settled units020155
Value of units settled$10.00$50.00$30.00$30.00
Value of units settled Credit/Debit IndicatorCRDTCRDTDBITDBIT
Number of Settlement Obligations3122

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 Broadcast Notification Process for further information. 

Cancellation of Batch Settlement

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




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