CHESS facilitates the settlement of trades 💸
When shares are traded on the Australian Securities Exchange (ASX), settlement is carried out by a computer system called CHESS, which stands for the Clearing House Electronic Subregister System. Settlement is the fancy name given to the process of exchanging the legal ownership of shares for money.
CHESS authorises certain participants to settle trades 🤝
CHESS is operated by the ASX Settlement Pty Limited (ASX Settlement). They authorise certain participants (the name given to parties who are allowed to access CHESS), such as brokers, to access the CHESS system to settle trades (either made by the participants themselves or on behalf of their customers).
Openmarkets (a participant) is our broker and settles trades on behalf of Opentrader. You can read more about the role Openmarkets plays here.
CHESS records shareholdings ⚖️
As well as settlement, CHESS also electronically registers the legal ownership of shares on its sub-register, so there’s a verified record of who owns what shares. Registration allows participating brokers to manage their sponsored customers' shares, while the customer has full legal ownership of the shares.
CHESS also generates statements directly from the sub-register. Statements provide a form of independent validation of your trading activity (buys, sells, transfers and records of your holdings).
Registration makes CHESS sponsorship a secure and speedy way to trade.
In a nutshell, CHESS has two major functions within ASX 🌰
- Facilitating the settlement of trades
- Providing an electronic sub-register for shares
But what does CHESS sponsored mean? 🧐
Also referred to as broker sponsored, CHESS sponsored shares are simply shares that are registered with a participating stockbroker. The term sponsored is confusing because CHESS sponsored actually means that you own the shares directly, rather than your shares being held by someone else on your behalf, like they are on a Custodian model. Direct ownership means that you can do things like vote and receive dividends directly.
CHESS sponsored shares have a HIN (Holder Identification Number) #️⃣
A HIN is a unique number that’s issued to you by ASX when you become a customer of a participating broker. When you buy shares, they’re assigned to you via your HIN. A HIN is like a bank account number – it's used to identify all your shares with that broker. They usually start with the letter X and are followed by ten numbers, like X0001234567. You can have multiple HINs at various brokers, and you can transfer your HIN (or individual holdings) from one broker to another. To find your HIN, check out your CHESS statements.