The 33 per cent increase in the speed of Australasian capital markets scheduled for next March will have positive spin-offs for the industry, according to BNP Paribas Securities Services.
In a release, BNP Paribas said experience from European and other global markets has shown the move to a two-day settlement cycle from the ‘T+3’ standard provided benefits such as risk reduction and lower capital requirements for market players.
“BNP Paribas Securities Services believes that the shortened settlement cycle will decrease the associated risk related to clearing and settlement activity,” the release says. “This will decrease the capital requirements (including margin payments) placed upon trading and clearing participants accordingly.”
The NZX, ASX, and the Australian Financial Markets Association (AFMA) were co-ordinating the shift to T+2 across Australasia in both equity and debt markets with a March 7 switch-over date set down for both countries.
Doug Cameron, BNP Paribas NZ chief, said while market participants should quickly see the benefits of T+2 they do need to prepare for the change in pace.
“Especially where brokers are matching trades [that are then sent to custodians] the processes need to be efficient and automated,” Cameron said. “There’s going to be pressure on fund managers and administrators to make pre-settlement as early as possible.”
He said “with one day less to complete the process” manual matching systems will not be good enough.
“Also NZ fund managers who purchase Australian equities need to manage currency liquidity well as forex is also moving to T+2,” Cameron said.
He said in the lead-up to March 7, BNP would be focusing on communication and education to keep clients up to speed on the impending T+2 transition.