Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 4

Each market must have clear rules assuring investor protection by safeguarding participants from the financial risks of failed settlement and ensuring that listed companies are required to follow sound policies on corporate governance, transfer of economic benefits and shareholder rights.

1.	Does the depository or the market have securities lending and borrowing schemes in place, and are these open to all market participants and their settlement agents?	Austraclear There is no formal stocklending product in place through Austraclear although members do utilise other functionality in the system for this purpose. Some semi-government issuers also operate a stock lending program with their dealer panel. RITS Neither the depository nor the market operates special facilities. However, securities lending and borrowing in CGS, with terms bilaterally agreed between counterparties, is common market practice. The RBA operates a securities lending facility in CGS where it stands ready to lend securities from its own portfolio to all Members of RITS. This facility is intended be used to alleviate settlement difficulties in the market and the RBA attempts to ensure that it is always the most expensive lender in the market. CHESS There is an active wholesale lending market for Australian equities. Participation in borrowing/lending transactions is subject to bilateral contractual arrangements between counterparties. Securities movements can be effected through CHESS. ASTC itself operates a batching facility for retail sized securities loans, in conjunction with a custodian as the supplier of securities.
2.	Does the settlement system mark fail trades to market and collect margin from the failing counterparty to protect the innocent counterpart's interest?	Austraclear No. RITS No. Any margins taken are solely by agreement between counterparties. CHESS Yes.
3.	Does the market operate a guarantee fund or have an equivalent procedure to protect against the cost of failed transactions; and which sectors of the market does it cover?	Austraclear No. RITS No. CHESS Yes, in respect of transactions that are reportable to the Australian Stock Exchange under its Business Rules. The contract completion guarantee for such transactions extends to end investors.
4.	Are the stock transfer agents (share registrars) linked electronically to the depository?	Austraclear No. RITS Not applicable. The RBA acts in both capacities for CGS, as the operator of RITS and of the Commonwealth Registry of Inscribed Stock. (Note for information: all CGS lodged in RITS are held by book entry on the Commonwealth Registry of Inscribed Stock in the name of the RBA RITS Pool Account. Transfers across RITS are rights to CGS ("chooses in action"). 98% of available stock are lodged in RITS, and over 99% of turnover by value takes place across RITS. CHESS Yes.
5.	Is there a legal maximum time period to complete ownership transfers in the books of the issuer? If so, does market practice adhere to the deadline?	Austraclear Ownership transfers are Delivery vs Payment (DVP), real time, online. RITS All securities transfers across RITS are immediate and final. As noted in 4 above, these account for over 99% of CGS turnover, by value. Transfers across the Registry (ie involving transfer of stock outside of RITS) generally occur on the same day as lodgement of required documents. CHESS Yes - the time prescribed under SCH Business Rules is 12 business hours. Market practice is to comply with this prescribed time.
6.	Are investors entitled to all benefits arising on a security from the point of purchase; and how are any rules enforced?	Austraclear Yes, via Austraclear Regulations and Operating Manual. RITS Yes - (if Members of RITS), by virtue of the RITS Regulations and Conditions of Operation and associated tripartite contracts between the Member, the Member's Participating Bank, and the RBA. CHESS Yes - via ASX Business Rules and SCH Business Rules, which prescribe a protocol for trading on "cum" and "ex" bases in respect of corporate actions.
7.	Is proxy voting permissible in the market and can such proxies be lodged by post or other remote delivery method?	Austraclear The depository is a nominee holder only of securities. Proxy voting is effected between the issuer and the investors / beneficial owners. RITS Not applicable. CHESS Yes - by post or other physical means.
8.	Are there binding rules in the market stating the minimum and maximum lapsed time between the announcement and completion of key events, including registration, the calling of shareholder meetings, the payment of dividends or interest, rights issues, tender offers and other voluntary corporate actions?	Austraclear Debt securities are issued in accordance with issue documents, which dictate the rights and obligations of issuers and investors. The documents set out time parameters for registration and payments. RITS The Prospectus (separate ones for Treasury Bonds and Treasury Notes) for issuance by competitive tender of CGS by the Commonwealth of Australia sets out: standard contents of tender announcement (series, amount, settlement arrangements etc) eligibility for tendering (must be Members of RITS, where tender bids are made electronically) basis of allotment interest and maturity/repayment details CHESS Yes - either through the Corporations Law or ASX/SCH Business Rules.
9.	Are all voluntary corporate actions advised through a central mechanism assuring consistent information to all investors?	Austraclear Austraclear only handles debt securities (not equities). Corporate actions on debt securities depend on the issuer's terms of issue. Generally this is payment of interest and/or principal and this is carried out through the depositories clearing system. These payments would generally not satisfy the terminology of 'voluntary' corporate actions. RITS RITS only handles CGS (not equities). Standard "corporate actions" (payment of interest and/or principal) on CGS are as set out in the relevant prospectus (see 8 above). Other matters are reported by the Australian Office of Financial Management (an arm of the issuer, the Commonwealth Government) by way of media releases. CHESS Yes - listed issuers are obliged to lodge such advices to ASX, which then disseminates the announcements to other parties.
10.	Is information on corporate actions available electronically, and is the minimum lapsed time for responding to such actions sufficient to enable all domestic and foreign investors to respond in a timely and considered fashion?	Austraclear Debt securities effect their corporate actions via the depository and registry. Corporate actions on debt securities depend on the issuer's terms of issue. Generally this is payment of interest and/or principal and this is carried out through the depositories clearing system. Corporate action information is available electronically through online query functionality and reporting. RITS Information on tenders for issue of new CGS is available online via RITS and electronic news services. The question is otherwise not applicable. CHESS In respect of corporate actions information, Yes - via ASX data signals. The question of adequacy of "minimum lapsed time" for responding is a constant tension between issuers/underwriters, and investors, whether foreign or domestic. Current times are unlikely to be extended at the behest of ISSA.