What is CHESS Sponsorship?

CHESS stands for Clearing House Electronic Subregister System, a system used by the Australian Securities Exchange (ASX) to record who owns which shares. It's unique to Australia and allows you to have direct, legal ownership of your shares through a personal Holder Identification Number (HIN).

When you buy shares or ETFs, they are registered under your name in the CHESS system, making ownership clear and verifiable through share registries.

How CHESS Works:

1. HIN: This is your personal ID for shares. It’s a unique 11-character code that lets you track your ownership.

   
   

2. Share Registry: When a company lists on the ASX, it uses an independent registry (e.g., Computershare or Link Market Services) to manage shareholder details like ownership, dividend payments, and updates.

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Viewing Your Shares:

• Step 1: Log into your broker and find your HIN.

• Step 2: Go to the ASX website and search for the company or ETF you own.

• Step 3: Access the share registry website to view or update your ownership details.

  
  

What is a Custodian Model?

In contrast to CHESS, some brokers use a custodian model, where a third party (custodian) holds legal ownership of your shares, but you’re the beneficial owner. This is common for international brokers or brokers that want to cut costs. However, the process of accessing or transferring shares can be slower, and you won’t have direct control over your holdings like with CHESS.

CHESS vs Custodian: Pros and Cons

CHESS Sponsorship (Direct Ownership):

Pros:

-          Full legal ownership of shares.

-          Transparent ownership (can view directly through the share registry).

-          Access to automatic dividend reinvestment and issuer communications.

Cons:

-          Potentially higher costs for small, frequent trades.

-          Can be a bit more complex to manage.

Custodian Model:

Pros:

-          Lower costs, especially for small trades.

-          Simpler platform with everything in one place.

-          Some platforms offer fractional shares.

Cons:

-          No direct legal ownership.

-          Access to shares can take longer if the broker faces issues.

Summary:

CHESS sponsorship offers direct, transparent ownership of your shares, while the custodian model is simpler and more cost-effective for smaller trades but doesn’t offer direct legal ownership. Depending on your trading needs, you can choose a broker that aligns with your preferences for cost, control, and simplicity.