What is contra settlement?

Ordinarily when you place an order to buy or sell shares, you will receive a contract note when your order is filled or partially filled and the trade will settle two business days later. This settlement is known as T+2.

For example, if you buy $10,000 worth of shares on Monday, then the money will be taken from your nominated settlement account on Wednesday. You will need to ensure that cleared funds are available in your account on the morning of settlement.

However, if you place multiple buy and sell orders within the same day or the following day, then a settlement process called contra may be evoked where only the difference between the executed trades will be direct debited or credited.

This may apply if you:

• Buy, then sell shares on the same day or the next trading day; or
• Sell, then buy shares the same day or the next trading day

Rolling settlement

If you were to make three or more buy or sell orders that were executed within a day or over a short period of time, the settlement amount and due date could keep moving until you stop placing trades within a contra period.

This means the settlement obligation moves forward and settles T+2 in relation to the trade with the largest dollar value, regardless of whether you owe the money, or are owed.

Therefore while contra indicates that buy and sell trades will be offset, the settlement date will be determined by the trade with the largest dollar value.

How to view the breakdown of your contra settlement amount

As a CommSec customer, to see your upcoming settlement amounts, view your estimated settlements on the “Portfolio summary” page.

Selecting ‘Accounts’ then ‘Transactions’ on the “portfolio” page will provide you with a complete breakdown of the transactions (debits for Buys and credits for Sells) for the selected date range..