Questions about settlement - Aussie Stock Forums

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  1. #1

    Default Questions about settlement

    This is my first post on the forum. Hi all!

    I just wanted to know... does it ever happen that you enter into a transaction on the ASX (e.g. with a comsec account) and the other party doesn't come up with the goods? (e.g. they fail to have their shares, or fail to have the money in T + 3)? (I think this is called counterparty risk, but I could be wrong).

    So I have not experienced that but wondered if it is possible and what happens exactly. Do you just get your money returned and some sort of message (if you entered into a "buy"), or do you get your shares returned to your account (if you entered into a "sell")? Is there some sort of message? Any compensation (I doubt there would be any)?

    I've looked all over comsec and the asx site and can't figure out what would happen in the cases I mentioned.

    And if you are the party that can't come up with the money (or shares), any idea what the fines are like? I was reading that the naked shorts were paying up to $2000 a day in fines, which seems like it would be just a slap on the wrist.

    Thanks, hopefully someone knows the answer.

  2. #2

    Default Re: Question about settlement

    If you buy shares they go straight into your account.

    I don't know about all brokers but at least on E-trade if I don't have the necessary funds in the cash a/c the order won't be accepted.

    And if you're selling, then as soon as the order goes through, the shares are gone from your a/c and settlement occurs in the usual 3 days.

    Not sure if this answers your question, or if there's something else that's concerning you?

  3. #3

    Default Re: Question about settlement

    As I understand it, the ASX guarantees settlement by both parties in all trades - I think for transparency the whole process is handled by a separate entity called the Australian Clearing House. There is also something called the National Guarantee Fund which is a pool of funds set aside for compensation in the event of claims.

    I'm a bit rusty on the specific mechanics - I think that the participating broker is liable for sales/purchase done by their chess sponsored clients, but then the NGF comes into play if the broker can't cover (i.e. broker goes under) but I could be completely wrong here so best to research it further yourself.
    Don't take investment advice from seafood.

  4. #4

    Default Re: Question about settlement

    Quote Originally Posted by cuttlefish View Post
    I'm a bit rusty on the specific mechanics .
    You should then not comment , get your act together before spooking girl

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