Settlement and Contra Explained

Learn the difference between settlement and contra

Contra Illustration

What is a settlement?

Settlement marks the official transfer of securities to the buyer's account and cash to the seller's account. Settlement takes place 2 business days (T+2) after your trade is partially or fully executed, unless the stock is trading under a Deferred Settlement basis or your trade is managed through Contra.

Here are some examples of settlement

Example 1

Monday Tuesday Wednesday Thursday Friday

Alex buys $5,000 worth of BHP shares (T)

  

Alex buys $8,000 worth of RIO shares (T)

Alex’s bank account is debited $5,000 for the purchase of BHP shares2

  

Alex’s bank account is debited $8,000 for the purchase of RIO shares2
Chart Example: 1

Example 2

Monday Tuesday Wednesday Thursday Friday

Alex sells $12,000 worth of BHP shares (T)

Alex sells $7,000 worth of RIO shares (T)

Alex’s bank account is credited $12,000 for the sale of BHP shares1

Alex’s bank account is credited $7,000 for the sale of RIO shares1

 
Chart Example: 2

Example 3

Monday Tuesday Wednesday Thursday Friday

Alex sells $10,000 worth of BHP shares (T)

  

Alex buys $8,000 worth of RIO shares (T)

Alex’s bank account is credited $10,000 for the sale of BHP shares1

  

Alex’s bank account is debited $8,000 for the purchase of RIO shares2
Chart Example: 3

What is contra trading?

Contra trading occurs where multiple buy and sell trades completed on the same day or next trading day, are offset against each other. This means that only the net difference between the value of the trades will debited or credited to your linked settlement account.
When contra trading occurs, the date on which you are debited or credited depends on when you cease trading within a contra period.

Contra trading will occur when you:

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

Here are some examples where contra trading occurs

Example 4

Monday Tuesday Wednesday Thursday Friday

Alex buys $12,000 worth of BHP shares (T)

Alex sells $7,000 worth of RIO shares (T+1)

Alex’s bank account is debited $5,000 (T+2 of the BHP trade)2

    
Chart Example: 4

Example 5

Monday Tuesday Wednesday Thursday Friday

Alex buys $5,000 worth of BHP shares (T)

Alex sells $11,000 worth of RIO shares (T)

  

Alex’s bank account is credited $6,000 (T+2 from the last trade)1

 
Chart Example: 5

Example 6 – This is a rolling contra example as there are more than 3 buy and sell trades within T+1.

Monday Tuesday Wednesday Thursday Friday

Alex buys $6,000 worth of BHP shares (T)

Alex sells $10,000 worth of RIO shares (T)

Alex buys $12,000 worth of BHP shares (T)

Alex sells $5,000 worth of RIO shares (T)

  

Alex’s bank account is debited $3,000 (T+2 from the last trade)2
Chart Example: 6

1Credited to your nominated bank account overnight.

2You need to ensure cleared funds are available in your nominated bank account by 8am on this day.

Stocks used in these examples are for illustrative purposes only and not to be taken as advice to buy or sell.

Rolling contra trading

If you place three or more buy and sell orders that all execute within T+1, or over a short period of time, then your net debit or credit account, and the date of that net debit/credit may continue to move until you stop placing trades within a contra period.

How to view the breakdown of your upcoming settlements

You can see your upcoming estimated settlement amounts on the right hand side of the ‘Home’ page once logged in.

Alternatively you can view the estimated settlement amount and due date of your unsettled trades at any time by navigating to My Account > My Portfolio > Holdings & Accounts and selecting the Account Details tab.

Estimated Settlement Table
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This information is intended to provide information for educational purposes only and is subject to change at anytime without notice.