ASX needs to bolster tech before shortening trade settlement, experts say

By Scott Murdoch

SYDNEY, Oct 22 (Reuters) - The Australian exchange's plan to introduce the one-day settlement of cash equity trading will bring it in line with major global counterparts and bolster foreign interest, but it should tread cautiously given recent tech glitches, market experts say.

ASX ASX.AX Chief Executive Anthony Attia told Reuters last week that he was eager to introduce T+1 settlements in Australia, which currently operates a T+2 system, meaning trades take up to three days to settle.

The plan comes even as the ASX is looking to move on from its technology challenges following a series ​of trading outages, settlement delays and other glitches that have led to a reprimand and a regulatory fine over the past three years.

Governance Institute of Australia Chief Executive Katrina Horrobin said that the ASX, when looking to introduce the T+1 trade-settlement mechanism, needed to balance speed with careful implementation.

"Any move to T+1 should be carefully staged, supported by rigorous industry testing, meaningful stakeholder consultation and clear communication," she said. "Market participants need confidence they can manage the transition effectively."

ASX Chair David Clarke told shareholders at the company's annual meeting on Thursday that the company had reached a turning point in addressing its regulatory troubles.

The US has had one-day settlement periods for two years while Hong Kong, London and many European markets have said they would start under that system later next year.

Attia has said that because the first stage of the new clearing and settlement systems - known as CHESS 1 - is underway, the Australian exchange could introduce T+1 now.

Financial Services Council Chief Executive Blake Briggs said Australia needed to be globally competitive and a T+1 system would help to ensure the country's equity markets remained aligned with the rest of the world.

"Unfortunately, Australia's transition to T+1 has been delayed by the delays in the CHESS replacement program," he said.

"With the ASX's technology overhaul underway, the FSC encourages the prioritisation of the move to T+1 and the necessary investment and industry consultation that will make the reform a success."

The FSC is the industry body that represents pension funds, wealth managers and financial advisors.

The ASX considered the shorter trading settlements in 2024, but the plans were put on hold as the exchange implemented an A$445 million ($312.1 million) overhaul of its aging technology.