SGX moves to T+2 securities settlement cycle starting Dec 10

The Singapore Exchange (SGX) will launch a new securities settlement and depository framework and system on Dec 10, which will reduce settlement cycles from three to two days (T+2) and enable simultaneous settlement of money and securities.

In a press release on Tuesday, SGX said that the T+2 settlement cycle will synchronise the Singapore bourse with global markets including Australia, the European Union, Hong Kong and the US.

"Come Dec 10, we will align our securities clearing and settlement processes with global standards, strengthening Singapore's position as an international financial centre," said Chew Sutat, executive vice-president and head of equities and fixed income at SGX.

"With the new settlement and depository framework, securities and funds will be made available to investors earlier, while reducing risks across systems and markets. Our new system will also enable us and our securities members to enhance services for the market."

Improvements in the new settlement and depository system include the streamlining of Central Depository notifications, as well as a new broker-linked balance function for investors. This feature will allow investors to give their brokers visibility over specific securities, so that the brokers can offer more personalised products and services to their clients.

Head of trading Apac at Oanda Stephen Innes thinks that the three-day rule has provided a more orderly settlement for securities as back office compatibility in the past was vastly different from shop to shop and required a lot of manual input.

Mr Innes said: "I think this move reflects the fact that virtually all local transactions and settlements are handled electronically by similarly coded systems reducing systematic risk, not to mention banks transfers can settle same day. Ultimately, however, this aligns SGX with global exchanges that moved to T-2 in 2017."

Leila Lai

14 November 2018