Most Read Contributor in Hong Kong, September 2016
Originally published August 4, 2011
Keywords: T+2, HKEx, finality arrangement,
CCASS money settlement, Central Clearing and Settlement System,
Hong Kong Securities Clearing Company Limited, HKSCC
Hong Kong Exchanges and Clearing Limited (HKEx) published its
"Consultation Conclusions on Introduction of a T+2 Finality
Arrangement for CCASS Money Settlement" on 7 July 2011
(Consultation Conclusions) in response to the corresponding
consultation paper published on 27 November 2009 pursuant to which
a new T+2 Finality arrangement for money settlement in the Central
Clearing and Settlement System (CCASS) established and operated by
Hong Kong Securities Clearing Company Limited (HKSCC) was
introduced on 25 July 2011. The major purpose of the new
arrangement is to reduce the overnight credit risk of the
securities market and align the money settlement arrangement in
Hong Kong with the international best practices by bringing
finality of securities and money settlements on the same day.
The Hong Kong securities market adopts a T+2 settlement period.
Before the introduction of the new T+2 Finality arrangement, trades
(Exchange Trades) concluded on The Stock Exchange of Hong Kong
Limited (SEHK) were settled two business days after the trade day.
While securities settlement for Exchange Trades took place in CCASS
on T+2, some related money obligations were settled through the
overnight interbank bulk settlement processes operated by Hong Kong
Interbank Clearing Limited (HKICL) in the morning of T+3. A
majority of Exchange Trades by value were settled on T+2 under a
process called prepayment. However, where prepayment was not
involved, such settlement mechanism would result in a one business
day gap between securities and money settlements.
T+2 Finality Arrangement
In summary, the new T+2 Finality arrangement introduces a new
interbank bulk settlement run which commences at 5:50 pm on every
business day to support money settlement relating to Exchange
Trades and other relevant trades on T+2. Under the arrangement:
designated banks should complete the processing of CCASS money
settlement instructions by 5:45pm before the interbank bulk
settlement run commences at 5:50 pm; and
designated banks can submit rejected CCASS payment items which
represent clearing participants' payment obligations (and cash
collateral if any) to HKSCC by 8:00 pm after the completion of the
interbank bulk settlement run if this has not been done so by 5:45
Copies of the Consultation Conclusions can be downloaded via the
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This article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
discussed herein. Please also read the JSM legal publications
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