MEDIA RELEASE No: 2000-19 Date: 24 November 2000 Embargo: For Immediate Release

PAYMENT SYSTEMS AND NETTING ACT 1998:
APPROVAL OF CHESS RTGS FEEDER SYSTEM

The Reserve Bank has declared that the Clearing House Electronic Subregister System (CHESS) is an approved real-time gross settlement (RTGS) system under section 9 of the Payment Systems and Netting Act 1998.

CHESS is the settlement system for equities in Australia, and handles around 55,000 transactions with a total value of $1.4 billion each day. Until now CHESS has settled all transactions on a net deferred basis. It will continue to provide net settlement, but is introducing an additional facility to allow RTGS settlement of transactions if the parties to the trade so wish.

The approval ensures that trades settled on a real-time gross settlement basis are protected from the so-called "zero-hour" rule. Under this rule, a court may declare that the bankruptcy of an institution commences from the midnight before the day on which the bankruptcy order was made; transactions settled between midnight and the time of the bankruptcy order would be void. The application of this rule would threaten the irrevocable nature of RTGS transactions.

The approval is a "disallowable instrument" under the Acts Interpretation Act 1901 and, accordingly, is being tabled before each House of the Commonwealth Parliament.