CHESS stands for Clearing House Electronic Subregister System, which is a computer system used by the Australian Securities Exchange (ASX) to record shareholdings and manage the settlement of share transactions. When shares are CHESS sponsored, it means that they are registered with a stockbroker, and the ASX has a record of the shareholder owning those shares directly. CHESS sponsorship is automatically applied to all newly opened CommSec Share Trading Accounts, and it is important to note that some share trading platforms operate under a different model.
Benefits of CHESS sponsored shares include streamlined processes for buying, selling, and transferring shares, as well as third-party verification that you own your shares. If shares are not CHESS sponsored, they are issuer sponsored, which means they are registered through a different share registry than the ASXs CHESS.
To register shares on the CHESS subregister, a sponsoring broker is needed, and a sponsorship agreement must be signed with the sponsoring broker to set out the terms and conditions on which they can operate the holdings on the CHESS subregister on behalf of the shareholder. The sponsoring broker controls the transfer of securities to and from the CHESS holdings, but it may only do so on the shareholders instructions and under the terms of the sponsorship agreement with them. Securities held in CHESS are the property of the shareholder, not the property of the sponsoring broker.
