ZIP Training - Share Ownership

Question 1

What is the difference between the Primary Market and the Secondary Market?

Answer 1

• Primary Market is where investors buy directly from the issuing company i.e. IPO.
• Secondary Market is where investors trade securities amongst themselves e.g., ASX, NASDAQ.

Question 2

What is an Initial Public Offering (IPO)?

Answer 2

An IPO, aka float, is where a company issues shares to the public for the first time. Often done by smaller companies looking to grow and expand, but also done by larger companies looking to be publicly traded.

Question 3

How does nabtrade as a broker interact with IPOs?

Answer 3

nabtrade are offered an allocation/portion of the stock in the IPO, then allocates that portion to customers.

Question 4

Australian shares can be held in two different ways - a share registry or CHESS. Describe each of these?

Answer 4

• Share Registry: an organisation that records changes in ownership, issues share holding statements and makes adjustments for corporate actions such as dividend payments and right issues.
• CHESS: an electronic sub-register which registers the ownership of all domestic shares on behalf of brokers. It facilitates the settlement and clearing of trades in shares. CHESS issues each domestic trading account a Holder Identification Number (HIN).

Question 5

Who or what issues each domestic trading account a Holder Identification Number (HIN)?

Answer 5

CHESS

Question 6

List 4 Share Registry services?

Answer 6

1. Look after shares for owners who do not have a broker.
2. Receive, validate, and process share transfers and sales.
3. Dividend distribution.
4. Handle IPOs and other corporate actions.

Question 7

Why does each company on the ASX engage a Share Registry?

Answer 7

To help with registration and maintenance of shares.

Question 8

What is a Security Reference Number (SRN)?

Answer 8

Identification number issued to shareholders of Issued Sponsored shares.

Question 9

What does CHESS stand for?

Answer 9

Clearing House Electronic Sub-register System

Question 10

Is each broker provided with a PID to identify themselves as a CHESS partipant (broker)?

Answer 10

Yes

Question 11

What is nabtrades PID?

Answer 11

1227

Question 12

Each nabtrade domestic trading account has its own HIN. Who maintains the HIN and when?

Answer 12

1. If cash-funded, nabtrade maintains the HIN.
2. If margin loan-funded, NEL maintains the HIN

Question 13

What are Corporate Actions?

Answer 13

Actions taken by a company to further raise capital, entice investors and heighten their image.
Includes dividends, rights issues, IPOs, etc.

Question 14

What are dividends?

Answer 14

Earnings in a company paid back to shareholders.