2015/16 Assessment of ASX Clearing and Settlement Facilities A1.2 ASX Clear (Futures) Standard 8: Settlement finality

A central counterparty should ensure clear and certain final settlement, at a minimum by the end of the value date. Where necessary or preferable, a central counterparty should facilitate final settlement intraday or in real time.

The vast majority of ASX Clear (Futures) settlements involve AUD cash payments between participants and the CCP for the purposes of margin payments and the settlement of cash-settled derivatives contracts. Each day, ASX Clear (Futures) calculates the net end-of-day obligations of each of its participants. Those participants with a net obligation to the CCP are required to settle payments to ASX Clear (Futures) by 11.00 am, for both AUD- and NZD-denominated contracts. Intraday margin payments must be met within the notified timeframe, which is generally one hour for futures derivatives and two hours for OTC derivatives. Once these payments have been received, ASX Clear (Futures) makes payments to those participants with a net obligation from the CCP. AUD cash settlements occur via Austraclear, with interbank obligations settled on an RTGS basis across ESAs at the Bank, via RITS.

In some cases, the settlement of derivatives contracts cleared by ASX Clear (Futures) involves the transfer of a security or physical asset, with a corresponding transfer of cash. For each type of security or asset, ASX Clear (Futures)' arrangements ensure that delivery occurs if, and only if, payment occurs. For 90-day bank bill futures, ASX Clear (Futures) utilises the standard settlement process in Austraclear. For grain contracts, delivery is via commodity warehouses, with ASX Clear (Futures) retaining title documentation until payment has been made.

ASX Clear (Futures) also accepts as collateral for initial margin certain highly liquid debt securities, such as Australian Government securities, and cash collateral in NZD and a small number of other foreign currencies. ASX Clear (Futures) has accounts at Austraclear and NZClear, an SSF owned and operated by the RBNZ, for settling AUD- and NZD-denominated collateral, respectively. Collateral denominated in other currencies is settled indirectly via relationships with commercial banks.

ASX Clear (Futures) defines the point at which settlement is final through contract specifications set out in its Operating Rules and Procedures, and those of ASX 24. The finality of its money settlements is further defined in the Austraclear and NZClear rules, supported by finality legislation in the relevant jurisdictions (CCP Standard 8.1). Contract specifications set out in ASX Clear (Futures)' and ASX 24's Operating Rules and Procedures also specify procedures and timetables for final settlement (CCP Standard 8.2). ASX Clear (Futures) does not allow settlement instructions to be revoked (CCP Standard 8.3).

8.1 A central counterparty's rules and procedures should clearly define the point at which settlement is final.

The settlement of obligations in ASX Clear (Futures) is final according to the terms of ASX Clear (Futures)' and, for exchange-traded derivatives, ASX 24's Operating Rules and Procedures, which set out the means of settlement. For payments and securities obligations settled in Austraclear, settlement is final according to Austraclear's Regulations and Procedures and supported by Austraclear's approval under Part 2 of the PSNA. This approval protects the finality of payments made through Austraclear in the event of a participant entering external administration (see Appendix A2.2, SSF Standard 7.1). Any interbank transactions arising from these payments are settled in real time across ESAs held with the Bank. Payments within this system are also final and irrevocable; this is again supported by the approval of RITS under Part 2 of the PSNA (see CCP Standard 1.2). With this approval, a payment executed in RITS at any time on the day on which a RITS participant enters external administration has the same standing as if the participant had gone into external administration on the next day. Accordingly, in the event of insolvency all transactions settled on the day of the insolvency are irrevocable and cannot be unwound.

In May 2016, The Resilience Act amended the PSNA to provide additional legal certainty for RTGS systems, such as Austraclear and RITS, that have been approved under the PSNA. These amendments facilitate the ongoing participation by institutions in ‘non-terminal’ external administration (e.g. statutory management) by clarifying that the protections under the PSNA continue to apply (see Standard 1.5).

NZD and NZD-denominated transactions that are settled through NZClear are deemed final in accordance with its System Rules. In particular, NZClear System Rule 11.8 provides that final and irrevocable settlement occurs when the requirements of a trade have been matched and the trade is recorded in the relevant accounts of the respective members. The NZClear settlement system has been declared a ‘designated settlement system’ for the purposes of Part 5C of the Reserve Bank of New Zealand Act 1989 (NZ), which gives legislative backing to the finality of settlements effected in accordance with the rules of the system..

8.2 A central counterparty should ensure final settlement no later than the end of the value date, and preferably intraday or in real time, to reduce settlement risk.

The settlement of obligations in ASX Clear (Futures) is governed by ASX Clear (Futures)' and, for exchange-traded derivatives, ASX 24's Operating Rules and Procedures. These set out settlement arrangements, including detailed procedures and timetables.

Margin payments and settlement of cash-settled derivatives

The majority of settlements in ASX Clear (Futures) are cash settlements made on a net basis (as described above) for the purposes of regular margin payments and settlement of payments arising from derivative transactions.

During the Assessment period, the majority of settlements of margin were in cash (AUD or foreign denominated). End of day initial and variation margin requirements are calculated overnight based on each day's closing contract prices supplemented by additional pricing data for OTC derivatives (see CCP Standard 6.2), and are notified to participants by 6.00 am the next day for payment on that day. Should ASX Clear (Futures)' exposures change significantly during the day, initial and variation margin can be called intraday (see CCP Standard 6.1). Intraday margin payments must be paid in cash within the notified timeframe, which is generally one hour for futures derivatives and two hours for OTC derivatives. End-of-day and intraday margin is settled via Austraclear for AUD payments, and NZClear for NZD payments.

Settlement values for cash-settled derivatives are calculated according to contract specifications. Futures are generally settled on the last trading day, or within one or two days after the last trading day. For example, for ASX SPI 200 Index Futures, ASX Clear (Futures) publishes the final settlement price of the contract on the first business day after expiry, with the associated cash flows settled on the second business day after expiry (the value date for this contract). By contrast, an OTC IRD contract can involve payments at regular intervals during the life of the contract, as well as payments at expiry. These payments are calculated overnight and settled on the next business day, along with margin payments.

Settlement-related, as well as margin-related, cash flows are settled in Austraclear or NZClear in real time with finality (see CCP Standard 8.1).

Physical delivery

With regard to deliverable contracts, ASX Clear (Futures)' arrangements for physical delivery are described under CCP Standard 10. ASX Clear (Futures) has procedures in place to ensure that margin of matched participants is not released until ASX can confirm that both participants have fulfilled their obligations. ASX Clear (Futures) also monitors and enforces compliance with delivery procedures.

The details of final settlement of deliverable contracts vary according to the contract specifications. For example, trading in the contract for 90-day bank accepted bills ceases on noon of the last trading day. This is followed by the exchange of reconciliation and advice notices between participants and the CCP, with final settlement of securities occurring in real time in Austraclear by 3.00 pm on the day after the last trading day (the value date for this contract).[16] By contrast, the delivery period for grain contracts commences on the second business day of the contract month, ending at 3.00 pm on the third Thursday of the contract month, with real-time final cash settlement scheduled to occur on the day after delivery.

Options delivery

All options on futures that are cleared by ASX Clear (Futures) either automatically exercise or are abandoned on expiry. In-the-money options automatically exercise unless the holder requests otherwise, and the holder and writer of the options receive their respective positions in the underlying futures contract. All cash flows related to the exercise of options contracts are included in daily settlement flows (along with initial and variation margin payments). There are no up-front premium payments associated with the options over futures contracts that are cleared by ASX Clear (Futures).

8.3 A central counterparty should clearly define the point after which unsettled payments, transfer instructions or other obligations may not be revoked by a participant.

Participants are not able to revoke a payment or transfer instruction once it has been submitted to ASX Clear (Futures).


The seller is required to enter the 90-day bank bill into Austraclear by 10.00 am. This must be matched by the buyer by 11.00 am and settled by 3.00 pm. [16]