What are the best CHESS-sponsored brokers?
When it comes to share ownership in Australia, you have two main options. Find out what CHESS sponsorship is and why you could consider it.
Best CHESS sponsored share trading platforms
With all the share trading platforms on the market, finding the right broker can be difficult.
But in Australia, there's an additional consideration of whether to choose CHESS or a custody model.
If you are considering signing up to a broker, Finder, using our proprietary algorithm, has come up with a list of CHESS-sponsored brokers worth considering.
What is CHESS sponsorship?
CHESS or Clearing House Electronic Subregister System is used by the Australian Securities Exchange (ASX) to keep a record of shareholdings and manage the settlement of share transactions. CHESS is a fancy way of saying a computer system that tracks who owns a share.
If you trade with a CHESS-sponsored broker, it means the ASX has a record of your buying and selling activities.
How we selected the best CHESS-sponsored brokers
We use our proprietary algorithm in order to give each trading platform a score.
Set up by Finder's data scientists and investment experts, our algorithm takes into account broker fees, trading tools, educational resources and the list of available stock markets on each platform.
Our methodology to select the best CHESS-sponsored brokers rated platforms on the following features:
- Availability of ASX CHESS-sponsored equities (Y/N filter)
- Availability of shares, ETFs, IPOs and mFunds
- Order types offered including market order, stop loss and other conditional orders
- Research tools including broker ratings, PE ratios, dividend tracking and tax reporting features
- Brokerage fees for Australian shares and ETFs
- Platform fees including withdrawal fees and inactivity fees
- Availability on desktop and mobile
- Average user rating
Important: Bear in mind, there's no trading platform that's best for everyone as all our needs are different. What's best for you might not be best for someone else. However we hope this guide can help you to narrow down your options, regardless of your trading style or level of experience. If you're looking for more details, see our full methodology here.
Our top pick for best CHESS-sponsored broker:
Other top CHESS-sponsored brokers:
What are HIN and CHESS?
If you have a CHESS-sponsored broker, you'll also have a HIN with it.
That is because in order to register shares in your name, the CHESS-sponsored broker must issue a Holder Identification Number (HIN).
Think of a banking account.
It is remarkably similar to this.
If you decide to change brokers, this HIN will follow you around as long as the next broker you join is also CHESS sponsored.
Custodial share trading model
When you sign up to a broker, they'll either run off a CHESS-sponsored or custodian model.
A custodian model basically means the custodian is the legal owner of the shares. This means that the broker owns the shares, not you. You are still a beneficial owner though, meaning you get the same dividends and capital gains. You just don't have the voting rights of CHESS shareholders.
The upside for this model is it is usually cheaper on fees.
The downside of a custodian model is that you have less direct control over your investment and less access to your holdings. Although it is worth pointing out that the entire US system works off a custody model.
Pros and cons of CHESS-sponsored shares
Let's start out with the good.
Direct ownership. With a CHESS-sponsored system lodged with the ASX, you're the legal owner of the shares because of your HIN.
Your broker or trading platform simply acts as a middleman between you and the exchange.
This means, if the broker happens to go under, your share ownership and the holdings themselves won't be impacted. You can simply shift your holdings over to another platform to continue trading.
Voting rights on shares. Another handy reason to go with CHESS-sponsored shares is that you'll be offered voting rights. As a company owner, you have the right to attend general meetings and to make decisions on directors' remunerations and other key factors that drive business performance. On the other hand, custodial brokers decide whether they wish to pass voting rights onto you or not.
Easier to switch brokers. If you decide to switch brokers, having your shares with a HIN can be incredibly handy. It typically means you'll just need to complete a 2-page online form and your shares will be sent, usually within a week. A custodian broker usually takes a little bit longer to sort out.
Did you know: Recent Finder research found that the average share trader could save approximately $1,048 in brokerage fees a year by switching to a more suitable online broker (calculated on 7 trades per month of $1,000). You might even save money by having more than 1 platform, especially if you are investing in both Australia and internationally.
Of course, there are some downsides to choosing a CHESS-sponsored model.
Lacks access to international markets. If you're looking to invest around the world, then the CHESS model won't help you since it is an Australian system. In fact, most of the world's largest share markets, including the US, run off a custodial model.
Higher fees. Now this will vary greatly depending on who you actually sign up with, but custodian models can mean cheaper fees for investors. This is one of the major reasons why investors choose them over CHESS sponsorship.
Fractional shares. Under a custodian share model, you can buy and sell fractions of shares, rather than a whole share. This can help you start out sooner especially when you're buying stocks that are hundreds of dollars per share.
Less paperwork. Given you aren't the holder of the shares, the custodian broker will do the administration on your behalf.
If you are unconvinced, here's a list of all brokers
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