CHESS stands for: Clearing House Electronic Sub-register System. CHESS is the computer system responsible for settlements of trades. When you buy or sell shares, the title or legal ownership of those shares are exchanged for money, and this is called the settlement. Therefore CHESS is responsible for effecting these trades, or effecting the settlement. CHESS is also responsible for electronically registering the title of shares on its sub-register. So if you buy shares, your name would be held securely against those shares in the CHESS sub-register.
The main reasons why CHESS benefits investors is because it provides a way to own and transfer share ownership that is secure, efficient, convenient, seamless and also cost effective.
What is CHESS sponsored?
CHESS sponsored means that your shares are registered under your name on the CHESS sub-register. This is generally organised through a stock broker and is one of two ways you can register your shares. CHESS sponsored ownership means that your name will be on the legal title of the shares. You can also register your shares through an Issuer Sponsored sub-register, which is maintained by the company who issued the shares. This means that the company own the shares on the sub-registry, but on your behalf. This makes it slightly more messy and can be more difficult to sell shares and update information. For me, I like the piece of mind of directly owning my shares through a CHESS sponsor.
How to Register Shares on a CHESS Sub-register
To register on a CHESS sub-register, you have to find a stockbroker who will sponsor you on CHESS. The CHESS sponsor will operate your holdings on the CHESS sub-register on your behalf, which in no way changes your legal ownership of those shares. CHESS shareholders are always allocated a Holder Identification Number (HIN) which is kind of like a bank account number. A HIN is a unique number to you that identifies you on the sub-register. Once you have registered, this HIN should be mailed out to you. It is important to keep this in a safe place and protect it like you would a bank account number.
Which Brokers Offer CHESS Sponsorship?
There are a number of brokers to choose from in Australia, and quite a few that offer CHESS sponsorship. The Big 4 banks (Commonwealth, NAB, ANZ & Westpac) all offer their own CHESS sponsored brokerage platforms. These are great if you are already with that bank as fund transfers become quick and easy. Some of these platforms are more expensive per trade than others on the market, which would have to be weighed up by quicker transfer time & ease of use. The big 4 also have international trading and a range of additional features which may make the increased trading costs worthwhile for you.
Other CHESS Sponsored brokerage platforms include Self Wealth, Pearler and Open Trader. These are all quite different and offer a range of features, but all similarly have cheaper trading fees than the big 4 banks.
I personally have spent most of my time investing with NAB trade. When I first started investing I was banking with NAB, so it was the easiest choice and was very convenient. Since I bought my home I have moved my banking to Bank West who do not have a brokerage platform, so I am now using Pearler as NAB trade is no longer convenient. It is still early days with Pearler but am so far enjoying the platform and really like the features included. I also like the investors they are trying to attract, which is long term, passive investors like myself.
If you want to use Pearler for your investing, use the code MINDOVERMONEY to get a free trade!
If you are feeling overwhelmed about options for brokerage platforms, don’t be. Your first choice doesn’t have to be perfect, it is more important to just get started. Like me, you can always change later, or even have multiple platforms at once. It is free to sign up, the only fees are trading fees on the CHESS sponsored platforms I listed, so you have nothing to lose! In my opinion, CHESS sponsored is the way to go, however there are other options. Micro investing isn’t CHESS sponsored but is a great place to start, and there are also other platforms that offer even cheaper fees if that’s something you are interested in. For Micro Investing, have a look at my blog post Battle of the Micro-investing Apps, and for other cheaper, non-CHESS sponsored platforms have a look at Vanguard Personal Investor, Spaceship and/or Stake. I will write another post later on these non-CHESS sponsored options.