Published On: Sun, Sep 16th, 2012

ASX New Fee Structure Involves the “Unbundling” of Fees to Settle Trades

ASX has completed the first stage of work necessary to unbundle cash market settlement services.

The current service and fee structure has been in place since 2006. It reflects a ‘one-size-fits-all’ offering that no longer aligns with customer needs in Australia’s more complex and diversified market. Similarly, in 2010, ASX unbundled cash market trading and technical services and fees.

This change will give customers a better understanding of the settlement services provided by ASX. ASX is introducing a more transparent fee structure to align charges with services provided and to ensure that customers are better informed about the services for which they are paying.

This first phase of changes to the fee structure will see a reduction in one headline fee and, with the introduction of the unbundled service, a new fee point.

The financial impact of these changes on customers will differ depending on the nature and scale of activities and workflow processes, and the choices customers make in the future as to which services they wish to use.

The changes will be effective from 1 January 2013 to allow customers to adjust their service models, systems and processes. These changes will not have a material effect on ASX’s revenue.

This initiative is part of a process of unbundling post-trade clearing and settlement services and fees that was foreshadowed in February 2011. ASX has been consulting with a range of customers and industry groups for several months on the first phase of changes that will now be implemented.

Taking into account market developments, ASX will continue to review its clearing and settlement service offering.

ASX’s clearing and settlement services offer customers significant operational and capital efficiency, risk reduction and flexibility in managing their businesses. ASX is committed to continuing to invest in the development of these services that form a critical part of Australia’s financial market infrastructure.

As a result of unbundling services, ASX is making the following changes to fees related to settlement services:
– introduction of the batch settlement fee (CHESS MT156 message)
– reduction in the delivery versus payment (DvP) settlement (CHESS MT101) message fee
All fees outlined in this notice are exclusive of GST.

Batch Settlement
The introduction of the batch settlement fee reflects the core function of the settlement process in confirming and effecting the final movement of cash (i.e. cleared funds) and securities (i.e. good title).

The batch settlement process incorporates the settlement of all transactions, both netted and bilateral instructions, and delivers the following benefits:
– mitigation of the risk of payment without delivery and delivery without payment
– payment/cash management (liquidity) efficiency by facilitating a single payment against all securities scheduled for settlement
– inclusion of all transactions, both novated and non-novated (bilateral), into a single batch
– settlement of cleared funds through the RBA Information and Transfer System (RITS).

BATCH SETTLEMENT DvP (generated from a 164, 134 or 101 message)
Batch settlement 156 message New Fee $ per Message – 0.30 settlement fee.

Bilateral Settlement/Miscellaneous Payment – CHESS MT101
This settlement function gives clearing and settlement participants flexibility in managing their (and their underlying customers’) on and off-market transaction activity, through matched bilateral instructions associated with:
– delivery versus payment (DvP)
– delivery without payment
– miscellaneous payments.

These functions provide efficiency and flexibility in allowing the participant to manage their delivery obligations in a manner that suits their business model. Specific benefits include:
– ability to manage various types of settlement instructions between counterparties – i.e. with or without payment
– ability to determine and set the settlement batch date providing the ability to manage all movements
– ability to consolidate transactions into a single instruction thus reducing settlement costs
– mitigation of client risk exposure
– reduction in liquidity requirements
– reduction in administrative requirements.

Reductions to the associated fees are as follows:
DvP settlement A$1.60 to A$1.30
Miscellaneous payment A$1.60 to A$1.30

These reductions take into account the new batch settlement fee which applies to bilateral settlement instructions.

Sub-Register Service
As part of its initiative to unbundle post-trade services and provide greater transparency for customers, ASX recognises the value of sub-register services provided by ASX Settlement. The sub-register services provide the following benefits:
– allows the participant to manage the holding and the holder
– facilitates ease of movement of securities under instructions from the owner or its agent
– provides flexibility in the structure of holding securities across single or multiple HINs
– provides full dematerialisation of securities
– delivers a secure platform protecting the confidentiality, integrity and security of information
– distributes independent validation of transactions and holdings via CHESS statements.

ASX believes there are opportunities to develop these sub-registry services and is exploring new service areas, with appropriate fee points. ASX is not introducing a sub-registry fee at this time. The provision and maintenance of a sub-register is a valuable service which provides customers the benefits outlined above as well as an efficient mechanism to support varying business models.

CHESS and Sub-register Transfer and Conversions
These instructions allow flexibility, administrative efficiency and choice in location of holdings.
These fees are unchanged.

Transaction Modification
The transaction modification messages provide the mechanism to amend or cancel a settlement, and to request a transfer or conversion, providing further flexibility in managing settlement instructions.
These fees are unchanged.

Queries and Reports
The query and reports fees are unchanged.

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