When you buy or sell financial products such as shares, you must exchange the title or legal ownership of those financial products for money. This exchange is called settlement.
Settlement takes place three business days after a trade occurs. For settlement through CHESS, payment and title exchange take place simultaneously.
Settlement occurs automatically three business days after a trade takes place (referred to as T+3). It is an automatic process provided by ASX, and involves two simultaneous processes:
- Payment is made for the trade by electronic transfer.
- The legal ownership of the security is transferred to the buyer.
This process is referred to as ‘delivery versus payment’ (DvP). The settlement process is handled by a settlement participant, who may be your broker or an agent contracted by your broker.
CHESS also enables investors to carry out off-market transfers, such as giving shares to another person as a gift. To do this, you simply tell your broker you wish to make an off-market transfer.
Ownership of most Australian securities does not involve paper certificates. Instead, ownership is recorded on electronic registers. Investors can choose to hold securities either on the CHESS subregister, which is maintained by ASX, or on a subregister sponsored by the security’s issuer.
Investors can choose where they would like their securities to be registered, and should inform their broker of their choice. To register shares on CHESS, your broker or their agent must act as your sponsor, and you will need to sign an agreement allowing them to manage your holdings on CHESS. You will also be issued with a holder identification number (HIN) and you will receive regular holding statements when there is a change in the balance of securities held.