Electronic clearance for Government securities

Provided by The Australian Investor

Friday 14th September 2001

The Australian Stock Exchange Limited (ASX) has welcomed a move by Federal Parliament to introduce legislation allowing Commonwealth Government securities to be cleared and settled electronically.

The Commonwealth Inscribed Stock (CIS) Amendment Bill, introduced in late August, is set to modernise the regulation of Government-backed securities by removing regulatory barriers to the electronic issue and transfer of these securities, including Treasury Notes and Treasury Bonds.

ASX's clearing system CHESS, which has operated since 1994, is used by brokers to settle their clients' securities transactions, and has enabled the replacement of share certificates by electronic account keeping. The original CIS legislation, passed in 1911, did not all for the possibility of non-paper securities.

The legislation is intended to create a better business environment for market participants by creating a more flexible legal framework, allowing for an efficient and innovative market.

If approved by Parliament, this will enable all government-backed securities to be handled through the ASX's clearing system CHESS. For the first time, retail investors will be able to use CHESS to hold their Commonwealth Government securities, alongside their investments in shares and non-government bonds and notes.

ASX managing director and chief executive officer, Richard Humphry, applauded the move, which ASX has actively supported for several years. "This is great news for investors and for the nation. Investors will soon be able to gain easy access to the most secure form of interest-bearing securities - those guaranteed by their own Government."

"This legislation acknowledges the efficiency and reliability of non-government clearing and settlement facilities by enabling them to handle those products."

"It also opens the way for investors to more easily manage their own portfolio. It highlights the leading role of ASX Interest Rate Market in broadening the range of investment products available for all investors by including the prime interest rate security in the nation."

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