T+2 Settlement

 

T+2 BRIEF EXPLANATION

T+2 Settlement Cycle (T+2) denote that the seller must deliver the purchased security and the buyer must make payment on the 2nd Exchange Day after the occurrence of the Exchange Transaction.

About T+2

As technological developments have enabled more rapid communications and practices improvement adopted by various Stock Exchange globally, one of the recommendations for Capital Market Development is to shorten settlement cycle. Currently, various European, Asian, and American Stock Exchanges have gradually begun to reduce their settlement cycle from T+3 to T+2.

Benefits expected from T+2 are settlement process efficiency, aligning with leading global settlement practices, enhance liquidity in the Market, enabling capital to be freed up faster for reinvestment, and mitigate systemic risk.

Indonesia Stock Exchange Settlement Cycle

Indonesia Stock Exchange Settlement after T+2 effective as follows :

 

Benefit of T+2

  1. Settlement process efficiency
    T+2 encourages market player to streamlines their settlement process, and lower operational cost in the long run
  2. Aligning with leading global settlement practices
    Most of Global Exchanges from European, Asian, and American Market gradually begun to reduce their settlement cycle to T+2.
  3. Enhance liquidity in the Market
    With shorter settlement cycle, securities that investor purchased can be resold in less time.
  4. Enabling capital to be freed up faster for reinvestment
    With shorter settlement cycle, Seller will also receive funds one day sooner, realize gains faster, and it also make investor easier to switch investment to other securities.
  5. Reduction of counterparty and market risks
    The longer the settlement time, the greater the risk that both parties exposed. Shortening Settlement Cycle also will help to mitigate market risk and reduce risk exposure between transacting parties and the Clearing House itself.

 

Dokumen

No Nama Dokumen Description Size(KB) Download
1. 001 IDX T+2 Settlement Cycle Change 87 Download
2. 002 Announcement Implementation of T+2 Settlement Cycle  1234 Download

 

FAQ

Q1 What is the Settlement Cycle?
Answer:

Settlement cycle is the period of time between the transaction date until the transaction is settled. After the transaction executed, the transaction must be settled in a way that the seller deliver the purchased security and the buyer make payment on this period, often referred to as T plus settlement cycle (T+).

 

Q2 How transaction settled in Indonesia Stock Exchange?
Answer:

Indonesia Stock Exchange Settlement Cycle can be illustrated as follows :

 

Currently, Settlement Cycle at Indonesia Stock Exchange differ from each of Market Board as follows :

Market

Settlement Cycle

Regular

On the 3rd Exchange Day after the occurrence of the Exchange Transaction (T+3)

Cash

On the same Exchange Day after the occurrence of the Exchange Transaction (T+0)

Negotiation

Based on the agreement between seller and buyer

 

Q3 What is T+2?
Answer:

T+2 Settlement Cycle (T+2) denote that the seller must deliver the purchased security and the buyer must make payment on the 2nd Exchange Day after the occurrence of the Exchange Transaction.

Q4 Why T+2?
Answer:

As technological developments have enabled more rapid communications and practices improvement adopted by various Stock Exchange globally, one of the recommendations for Capital Market Development is to shorten settlement cycle. Currently, various European, Asian, and American Stock Exchanges have gradually begun to reduce their settlement cycle from T+3 to T+2. Therefore, in order to implement Global Best Practices, Indonesia Stock Exchange has been considered to reduce its own settlement cycle to meet international standards.

Q5  What benefits are expected from T+2?
Answer:
  1. Settlement process efficiency
    T+2 encourages market player to streamlines their settlement process, and lower operational cost in the long run
  2. Aligning with leading global settlement practices
    Most of Global Exchanges from European, Asian, and American Market gradually begun to reduce their settlement cycle to T+2.
  3. Enhance liquidity in the Market
    With shorter settlement cycle, securities that investor purchased can be resold in less time.
  4. Enabling capital to be freed up faster for reinvestment
    With shorter settlement cycle, Seller will also receive funds one day sooner, realize gains faster, and it also make investor easier to switch investment to other securities.
  5. Reduction of counterparty and market risks
    The longer the settlement time, the greater the risk that both parties exposed. Shortening Settlement Cycle also will help to mitigate market risk and reduce risk exposure between transacting parties and the Clearing House itself.
Q6  Will Indonesia Stock Exchange shorten it settlement cycle to T+2 as well?
Answer:

Yes, T+2 will be implemented at Indonesia Stock Exchange on Monday, 26 November 2018 with details as follows :

Q7  How is settlement cycle for each market Board at Indonesia Stock Exchange after T+2 implemented?
Answer:

Change in Settlement Cycle for each market as follows:

Pasar

Siklus Penyelesaian Saat Ini

Siklus Penyelesaian T+2

Reguler

T+3

T+2

Tunai

T+0

T+0

Negosiasi

Sesuai kesepakatan, default T+3

Sesuai kesepakatan, default T+2

 

Regular Market Settlement as follows :

Q8 How will the business process from transaction to settlement become after T+2 implemented?
Answer:

To avoid any potential settlement failure on settlement date specifically for Institutional Clients, we encourage Custodian Bank and Exchange Member to resolve pre settlement matching process no later than T+1.

 

Q9 How will T+2 impact your transactions?
Answer:
  1. Double settlement on first T+2 settlement date:

  2. Market participants on T+2 will now have one less day to complete the pre-settlement matching process compared to prior settlement cycle.
  3. Securities lending and borrowing request for settlement purpose should be submitted on T+1 to ensure availability of securities that can be borrowed.
Q10 How many/much shares or funds should I deliver on first T+2 settlement if I trade on the last day of T+3 and the first day of T+2?
Answer:

The transaction on last day of T+3 and first day of T+2 will be netted by KPEI as following illustration :

Q11 How will T+2 impact on Corporate Action Entitlement?
Answer:

Change in Cum and Ex Date in Regular Market of Corporate Action are as follows :

Q12  What about the agreement that has been made between the Securities Company and the Clients?
Answer: 

Both Securities Company and Client is required to review and make adjustments on their contractual documents and existing agreements including, but not limited to, Opening Account documents, rights / obligations to receive funds and / or securities at the Trade Confirmation / Invoice, and Forced Sell / Buy in Margin and / or Shortsell facilities. Securities Company must inform any change of agreement to every of its Client by any means.

Q13  I have further questions related to T + 2
Answer:

You can send the question to :

Trading Reporting and Operational Evaluation Unit,
pelaporanevaluasi.opp@idx.co.id for questions about exchange transaction

Equity Unit,
unit.eku@kpei.co.id for questions about clearing and obligation of delivery

Transaction Settlement Unit,
pt@ksei.co.id for questions about settlement

Not sure which one? Send it to all of the emails.