Alternative listed securities market, Chi-X, has expanded its range of US listed transferable company custody receipts (TraCRs) with five more listings.
The new listings include those based on the shares of Amazon, Warren Buffet’s investment company Berkshire Hathaway (Class B) and pharmaceutical companies Johnson & Johnson, Merck and Pfizer. This brings the total number of TraCRs to 15.
Chi-X Australia chief executive, Vic Jokovic says: “Since the arrival of TraCRs in the Australian market, we have seen sustained interest, especially among the retail and SMSF segments.”
In October last year, Chi-X launched TraCRs to provide investors with exposure to US listed companies. Investors have a beneficial interest in the underlying share and certain rights attaching to the share.
Jokovic says: “The Australian market is heavily based on financials and mining and has limited access to technology names which is a huge part of the global and US market. This is about simplifying and making it easier, more efficient and cheaper to buy US names via TraCRs.”
Since launching, 9 of the 15 TraCRs available have traded at around $1 million with 12 brokers trading them.
Jokovic says: “We expected that it would be a slow education process as it was really about rolling the concept out to the brokers because generally they won’t embrace a new product until they are actually trading.”
The idea behind the product is to give Australian investors access to leading global companies, with the protection of trading on a local market.
When a security is sold or dividends paid, currency conversion will be at wholesale foreign exchange rates, which saves investors foreign exchange fees.
Jokovic says: “These investors typically want to diversify their portfolios, so it is appealing for them to be able access US listed shares without having to manage different time zones as well as foreign brokerage, FX and custody costs.”
TraCRs are issued by Deutsche Access Investments Limited (a member of the Deutsche Bank group) and quoted and traded exclusively on Chi-X’s market in Australian dollars.
In a significant win for Chi-X, the biggest online broker CommSec started offering TraCRs last month.
Bryan Richmond, Chi-X’s business development executive considers the online broking space as integral to the inflow of self-directed investors and other brokers.
Jokovic agrees: “The significance of having CommSec is that they hold around half of the market. If they are not a supporter there is a high likelihood of the product failing and many retail brokers will now have confidence in supporting the product.”
TraCRs are settled through CHESS and are held on investor’s HIN in the same way as Australian shares. They may be converted into the underlying US share at any time, subject to the terms of issue (the investor will be required to have a custodian or broker account in the US where the share can be held).
They are available to buy via CommSec, OpenMarkets, State One Stockbroking, Shaw and Partners, Patersons, FinEx, Baillieu Holst, Bell Potter, Morgans, BNY Mellon Pershing, Evans & Partners, Velocity Trade, Amscot Stockbroking and Wilsons Advisory.