The clearing and settlement process ensures the smooth and secure completion of your trades on the Abu Dhabi Securities Exchange (ADX). It acts as the final step after executing a trade, guaranteeing delivery of securities and timely payment. ADX follows a T+2 rolling settlement cycle, meaning trades settle two business days after execution (T-Day). This ensures efficient transfer of funds and shares electronically through a designated settlement bank.
Clearing
ADX facilitates trading through various members:
- Trading Members (Brokers): These entities can act as both brokers and Clearing Members (TCMs), allowing them to trade, clear, and settle trades for themselves and their clients.
- Custodian Members: Focused solely on client service, these members settle Delivery versus Payment (DVP) trades for their clients but cannot participate in trading themselves.
- General Clearing Members (GCMs): They act as intermediaries, clearing and settling trades on behalf of assigned Trading Members who don't have clearing rights.
Cycle and Process
The ADX settlement process follows a T+2 rolling settlement cycle, which means trades are settled two business days after the trade execution date (T-Day).
- T-Day: This is the day you execute a trade (buy or sell securities).
- T+1: On the first business day after the trade, no exchange of funds or securities takes place.
- T+2 (Settlement Day): This is the key day where the actual settlement occurs. By 9:30 am, the following happens:
- Cash Settlement: Sellers deliver the purchased securities to the buyer, and buyers transfer the agreed-upon funds to the seller. This exchange happens electronically through the designated settlement bank.
- Securities Settlement: Shares are electronically transferred between buyer and seller accounts using a book-entry system. No physical certificates are involved.
Rolling Settlement
This cycle is "rolling" because it applies to all trades executed on any given business day. So, trades executed on Monday (T-Day) will settle on Wednesday (T+2), while trades executed on Tuesday will settle on Thursday (T+2), and so on.
Benefits of T+2
- Efficiency: Funds and securities are exchanged quickly, minimizing settlement risk.
- Reduced Risk: By ensuring timely completion, the T+2 cycle minimizes the chance of defaults or delays.
- Transparency: Clear timelines provide predictability and ease of planning for investors.
Bank and Currency
ADX utilizes First Abu Dhabi Bank (FAB) as the designated settlement bank for all transactions. The standard settlement currency is United Arab Emirates Dirhams (AED) unless otherwise specified.
Settlement will not occur on public holidays declared by the Government of UAE and CBUAE. Please check the official calendar here.