Introduction to CHESS

What is CHESS?

CHESS stands for Clearing House Electronic Subregister System. It is an electronic book-entry register of holdings of approved securities.

The CHESS register is a subregister of the company’s securities register, and is managed by ASX Settlement and Transfer Corporation Pty Limited (ASTC) a wholly owned subsidiary of The Australian Stock Exchange (ASX).

The Australian Corporations Act has been amended to recognise holdings on this subregister as if they were maintained directly by companies or other issuers of ASX quoted securities.

The purpose of the electronic subregister is to facilitate the transfer and settlement of market transactions between CHESS participants (including stockbrokers on behalf of their clients, and large institutional investors on their own behalf) as well as speed up the registration of the transfer of securities.

How CHESS works

Improvements to Australia’s settlement system commenced in 1989 with the introduction of the Flexible Accelerated Securities Transfer (FAST) system. This system introduced the concept of uncertificated security holdings. These were at the securityholder’s option unless a company decided to become fully uncertificated. CHESS took this concept further by eliminating transfer documents from the settlement process, and replacing them with electronic transfer messages. This means that both the change of legal ownership of the securities and the settlement of the underlying market transaction (exchanging securities for money) can both take place electronically. To achieve this, securities involved in a market transaction must either be registered on a central electronic register, or be moved there in preparation for settlement.

The Registers under CHESS

Under CHESS, a securities register may be split into three subregisters:

  • The CHESS subregister which will be entirely uncertificated and will contain the holding balances for all securityholders who are CHESS participants, or who have a sponsorship agreement with a CHESS participant.
  • The Issuer Sponsored subregister will be maintained by companies who offer their securityholders the choice of having uncertificated Issuer Sponsored holdings outside the CHESS subregister.
  • The Certificated subregister which will contain details of all certificated holdings. (A certificated subregister need not be maintained if the company decided to become fully uncertificated , in which case the company would be required to maintain an Issuer Sponsored subregister in lieu of a Certificated subregister).

Australian companies listed on the ASX are obliged to establish a CHESS subregister.

Companies with CHESS approved securities must also maintain either or both of an Issuer Sponsored uncertificated subregister or a Certificated subregister. The company is responsible for maintaining the issuer operated subregisters. The CHESS subregister is maintained by SCH and constitutes the legal record of title for CHESS holders. The three subregisters combined constitute the company’s register of members for the purposes of the Corporations Law.

The company remains responsible for maintaining a copy of the whole register for public inspection and other purposes, which will involve the downloading of details of holdings on the CHESS subregister from the SCH computer system to the registry computer system.

CHESS maintains the concept of "names-on-register" security holdings.

Securityholders, whether they hold uncertificated or certificated holdings, continue to enjoy a direct relationship with the companies in which they have invested.

Participants in CHESS

The participants in CHESS are ASX member organisations or approved non-broker participants.

A securityholder on the CHESS subregister must be either a CHESS participant or be sponsored by one.

Each security holding on the CHESS subregister will have a designated "controlling participant" who alone can initiate transactions on the CHESS system in relation to that holding.

Securityholders who choose to have uncertificated holdings on the CHESS subregister, through a sponsorship agreement with a CHESS participant, will receive periodic holding statements directly from Settlement Administration.

Those holders who have Issuer Sponsored holdings will receive similar statements from the company registry.

These statements provide a record of transfers, allotments, etc. for uncertificated holdings.

Uncertificated securityholders who are sponsored by a broker or non-broker participant in CHESS will be allocated a unique identifying code in the CHESS system. This code together with the broker’s own unique code, provides the only authority under which CHESS will allow any transfer of securities.

Broker sponsored holdings are covered under the National Guarantee Fund for losses arising from any unauthorised transfer of shares by the broker.

CHESS Forms

The following forms are used in CHESS related matters:

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