Commsec - Direct Debit

Hello,

I've bought BHP shares last week (Wed 19/12/2007)...though until now haven't seen the money being debited from my Commonwealth CDIA linked account.

I however have received the contract note via email and mail.....and it lists a settlement date of 27/12/2007.

Does your money get debited on the settlement date automatically???.....or do i need to manually pay for it using BPAY (which is mentioned on the contract note)...

I've thought all along that there would be an automatic transaction on the day of purchase???

Thanks.

 

For Commsec it should happen 4 days afterwards. So the 4th business day after your trade would be tomorrow.

 

I also made purchases last week with Commsec and money gets directly taken from my account usually 3-4 business days after the trade which is also tomorrow (27/12).

 

Stupid me. should've read the contract note more carefully.....it says the funds will be transferred "ON SETTLEMENT DAY"...

Though do you start owning your shares the momment you buy or is it the momment u pay...?

 

Hi ArchAngel,

You start "owning" the shares when they are in your name (ie, in your HIN or SRN). This should be the afternoon of settlement date depending on how efficient your broker's backoffice is.

Cheers,

Dan

 

But for tax purposes, the critical date is the contract date, so I'd argue that you own them (or at least you are responsible for them!) from the moment you click 'buy'. As I see it, the T+3 settlement is a convenience which minimises paper shuffling, since you can buy and sell within 3 days and never take 'ownership'.

 

Hi Rod_WA,

Similarly to when someone buys a property, they have the purchase date and then the settlement date. For tax purposes (eg, capital gains) it is the price on the purchase date. For the actual entitlement and using the property is when you get the keys to the property, like getting the stock allocated on T+3.

T+3 is convenient, especially if you receive electronic contract notes, the paper ones can take a day or two to get to you, then if you send a cheque (you get the point).

Depending on your broker they may auto-contra (netting out trades) and hopefully leave you with $$$ in your account. Certainly on different days they "might" allocate the stock on one day and then take the stock off the next day as they don't usually like leaving stock in the entrepot account.

They would really get upset if you wanted to sell then buy across different settlement dates, if they couldn't cover your trade (by borrowing stock), eg, on a smaller stock you will be charged the ASX Fail Fee, which is a minimum of $50 and a maximum of $2million per day per stock based on 0.1% of trade value.

Some client's also don't like contra-ing as they want to be able to count each contract note and reconcile against HIN balances (slight paranoia).

While settling trades earlier (usually sells not buys), they'll take the stock off your HIN and pay you earlier less interest as they generally won't get the funds from the buying broker until standard settlement (ie, T+3) due to the stock sitting in the entrepot account until 10:30am on T+3 (settlement time).

For buys it is alot harder as your broker might not have the stock to allocate to you, if you want the stock earlier your broker has to mess about with CHESS messages and the selling broker has to agree to settle the trade earlier with you. If novation has occurred this can be extremely difficult, as you have to un-net all the trades for that stock for that settlement date.

Cheers,

Dan

 

Thanks Dan
That all sounds too complicated for me while I'm on holidays!

But I was just making the point that all that back-office stuff is not important to me; what is important to me is that the contract note says that I need to have $x available in my account on y date, but as far as I am concerned I have already completed the transaction.

As a comparison with property, I might purchase a house on 1 January and it might settle on 1 Feb. I agree that I don't get the keys until it settles, but in this case there's a definite chance that settlement may fall through, beyond my control. In fact, I would be nervous (have been in the past!) as settlement day approaches, as the probability of a breakdown is real.

But with shares, my transaction is weeny compared to daily volumes, and the ASX transfer system (and my broker's reputation!) simply manages the process and I have 100.0000% confidence that my transaction will occur.

But thanks for the technical response, I appreciate knowing where my $30 goes to!

Cheers
- Rod