What are CHESS sponsored shares?

‘CHESS’ stands for Clearing House Electronic Subregister System. In plain English, it’s a computer system that facilitates the buying and selling of shares on the Australian Securities Exchange (ASX). CHESS sponsored shares are recorded on this computer system to keep track of who owns the shares directly. 

It’s just one of the many acronyms that make up the colourful, confusing lingo of the share trading world. However, it can be important for beginner share traders to know the differences in share registries and how that can affect their investments. 

Let’s get into the details

There are two main ways of registering shareholdings. These are CHESS sponsored and issuer sponsored. 

If you buy CHESS sponsored shares through a stockbroker, you’ll be given a Holder Identification Number (HIN), if you don’t have one already. A HIN is used to identify the owner of shares that are held by a broker. 

When you move brokers, you’ll be able to more easily bring your CHESS sponsored shares with you by simply transferring your HIN during the sign-up process.  

What are issuer sponsored shares? 

Issuer sponsored shares are those which you haven’t bought through a stockbroker. So, issuer sponsored shares will instead be registered through a different share registry than the ASX’s CHESS. 

Issuer sponsored shares come with a Security Reference Number (SRN), which is similar in nature to the aforementioned HIN, except that you’ll have a unique SRN for each shareholding.

Your shares will likely be CHESS sponsored if:

• You bought them through a stockbroker
• They are registered to your HIN.

However, it’s important to note that some share trading platforms aren’t CHESS sponsored but instead operate under a different model.

There are a few benefits to having CHESS sponsored shares, like: 

• Direct ownership of and access to your shares (as opposed to a custodian model)
• The ability to vote directly on company matters 
• All shares held under your HIN which makes it simpler to transfer to another broker
• Less paperwork from several different registries at the end of the year (get a single CHESS statement) 
• Update and keep your personal info in one place on one registry.

What are custodian model shares?

If you purchase shares through a custodian model, your shares will be held under a broker’s HIN. You’re still given beneficial ownership of the shares, meaning you can still buy and sell them, but the shares won’t be legally in your name. 

That’s one of the main disadvantages of the custodian model because if a broker goes broke (which is a plausible situation), you may not get access to your shares for some time – in the worst cases, multiple years. 

It is, however, an uncommon occurrence. So, don’t take it as a reason not to invest with a custodial model broker. There are pros and cons to either model. 

Looking to get started in share trading or find a new online broker? Compare share trading accounts with Mozo to get an instant overview of the share accounts on offer, including brokerage fees, monthly fees, and key features. 

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