How are my shares protected by Superhero?



August 2nd 2021 3 minute read

Superhero has been built to ensure our customers and your investments are protected. It can be difficult to understand the difference between various acronyms and what they actually mean so we’ve explained a few of these below. If you still have questions our team is available to support you.

What is a CHESS-sponsored trade?

The term “CHESS-sponsored trades” has been bandied around by marketing teams of various brokers and can be a little confusing. There is no such thing as a “CHESS-sponsored trade”.

All trades in Australia, whether through ASX or Cboe (including those placed on Superhero) are cleared and settled via the Clearing House Electronic Subregister System, or ‘CHESS’, a computer system used by the Australian Securities Exchange (ASX) to manage the settlement of trades and record share holdings. 

However, when people use the term “CHESS-sponsored,” they most likely mean that your shares are held by a market participant, your broker, on a Holder Identification Number, or ‘HIN’, in your name.

How does custody work? What is the difference?

A custodian is a regulated financial institution licensed to hold financial assets on your behalf for safekeeping. Custodians are required to hold an Australian Financial Services Licence (AFSL) and to have adequate financial resources in place to provide their services to you with the necessary investor protections in mind.

At Superhero, we have appointed a sub-custodian to hold shares on behalf of our customers in Australia for safekeeping as well as for a number of other reasons (and we’ll get to that soon).

Your shares are actually held by FinClear, which is Superhero’s market, clearing, and settlement participant. FinClear is used by many major brokers in Australia and holds all of the CHESS-sponsored shares for customers of brokers such as Stake, WeBull, Shaw and Partners and numerous other firms.

As a regulated entity, FinClear holds the legal title to your shares as a separate entity from Superhero (so there’s a clear separation between our operating business and your shares). This means that your shares are not in any way linked to Superhero’s financial viability because FinClear holds the legal title to your shares.

A custodian structure ensures that the beneficial owner (that’s you) is the only one who can give instructions on what to do with your shares: be it buy more, sell some or transfer them to another broker. That is also true for creditors, who have no legal right to access your assets if Superhero were to no longer operate.

If Superhero goes out of business, are my shares safe?

Rest assured, the shares held in your Superhero account are exclusively yours and legally cannot be accessed by anyone but you, including by any claims from creditors. As the beneficial owner of your shares, only you are able to exercise any rights attached to the ownership of those shares by providing instructions to Superhero. This includes disposing of, or otherwise dealing in, your shares. 

What are the benefits of using a custodian?

At Superhero, we could follow the legacy brokers and use the system the ASX is desperately trying to replace. Instead, we carefully selected a custodian model to serve our customers better. Here’s why:

  1. Low pricing and transparent fees: We’re all about keeping things affordable and our fees in plain sight. By adopting the custodian model, we strip out unnecessary ASX fees that other brokers may choose to pass onto you in one way or another. We’re committed to offering a clear and sustainable fee structure from the start.
  2. Reducing communication overload: We understand that frequent investors can receive an overwhelming amount of communication containing their holding details from CHESS—sometimes up to 50 letters a month! With Superhero, we manage and consolidate these communications on your behalf, giving you a hassle-free, paper-free investing experience. 
  3. Globally recognised model: Having a custodian is a well established and  globally-accepted operating approach used by most Australian superannuation funds and by other reputable market players like IG Markets, Interactive Brokers, Spaceship, Pearler Micro and Stake (for U.S. shares).
  4. Compliant with U.S. operations: U.S. shares cannot be held in your name under a “CHESS-sponsored” arrangement as CHESS is an ASX-only system that is uniquely Australian. Therefore, a custodian is used to safeguard your U.S. shares while offering you the full benefits of ownership.
  5. Seamless participation in corporate actions: Superhero can facilitate your participation in company offers directly. If you’re an eligible shareholder, we’ll promptly deliver the offer information to your email inbox for you to participate in things like share purchase plans and entitlement offers.