What is CHESS Sponsored? this is the first question for every beginner who just entered into ASX shares trading and investing. In Australia, while choosing the right broker to buy and sell ASX shares the most common question is related to Chess sponsorship Shares.
Isn't it confusing because normally it is a game and why it is linked here? ( Just kidding ). To start with shares or ETFs the first term you need to understand how CHESS sponsorship works and whether Is it important.
|What is CHESS Sponsored Shares|
When anyone buys shares from online brokers using their website or app then they keep a record. But, how legal ownership of your shares is settled? for this CHESS system is used. Because it will help you to know the legal ownership of that shares or ETFs.
So, let's get started.
What is the CHESS in ASX?
Every stock exchange around the world has its own system to keep a record of all shares and trading activities and ownership details.
In Australia, the stock exchange is called ASX which stands for Australian Stock eXchange.
If you buy or sell shares in a listed company, there is an exchange of the title or legal ownership of those shares from someone to you. This process of exchange is called settlement.
So, When shares are traded on the ASX the legal information of that shares is exchanged or settlement is carried out by a computer system called CHESS which stands for the Clearing House Electronic Subregister System.
CHESS is a system to clear all the execution and settlement of trades and keep a record of who owns which shares.
What is CHESS Sponsored?
Australia's stock exchange ASX uses a CHESS system, in which all the records of who owns shares & when shares are bought or sold are stored directly on your name via your own personal Holder Identification Number (HIN).
'CHESS Sponsored' means when you buy or sell shares then ASX has a record of your shares directly on your name with help of your personal Holder Identification Number.
In simple words, your ownership of that shares is directly linked to your HIN and registered in ASX.
But, have you heard of statements like our brokers are Chess sponsored and some brokers are not sponsored? using the Custodian model. To understand this we need to know the number of ways in which your shares are held in ASX.
CHESS sponsored shares and Issuer sponsored shares
Your shares can be registered in two ways.
CHESS sponsored shares are directly registered with a stock broker by allocated a Holding Identification Number (HIN) by the broker that is linked with ASX.
Issuer sponsored shares are managed by the issuer's share registry which can be traded through any broker, as long as conditions set out by that broker are met. Issuer sponsored shares are allocated a Securityholder Reference Number (SRN).
What are Custodian Brokers Shares?
The alternative system is the Custodian broker system in which the broker appoints a separate company to hold shares on your behalf is called a custodian.
So. they hold the legal title for you, meaning they are the legal owner and you are the beneficial owner of shares.
Is CHESS sponsorship important?
If your shares are CHESS sponsored the ASX has a record of you owning those shares directly via your HIN number which is important. It becomes easy to transfer your share with any other brokers.
But, it does not mean that the custodian model does not work properly or is not legal. Custodian brokers offer low-cost brokerage and also can invest in low amounts.
Benefits of CHESS sponsored shares
- Direct ownership and access to your shares.
- Directly Participate in company e-voting.
- Transfer to another broker is simple when shares are under your HIN
- Access to trade all listed companies and listed funds
- Risk-free investment
- Receive dividends directly
How do I become CHESS sponsored?
If you want to transfer your issuer-sponsored shares to become CHESS-sponsored shares, you'll need to transfer the shares from the share registry to sponsored brokers.
Another way is by filling out the request form.
If your account is not sponsored, you can apply for sponsorship by completing a "CHESS sponsorship request form". (This form is mainly used for transferring broker-sponsored shares to CHESS, but it can also be used to apply even if you're not transferring any shares.
Also read about popular Superhero Trading Review.
I hope the above-mentioned details in this article are helpful to understand what is CHESS sponsorship and many important terms related to it.
With the help of the above information, you can select a good broker based on your requirement and investment planning.
Well, it took time to gather and explain all this information.
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