CHESS subregister

Compounding growth is where investors can earn returns on their returns, aka interest on their interest. This exponential growth is like a snowball effect, rolling through the years, potentially picking up returns on returns. Learn more about this 'eighth wonder of the world'.

A commodity is a basic raw material, product or service that can be traded, usually in large volumes. In finance, commodities refer to widely available and traded items like metals, energy resources, agricultural and animal products, and include copper, gold, zinc, silver, coffee, cocoa, sugar, dairy and oil. Commodities are subject to supply and demand dynamics, and play a crucial role in global markets.

A clearinghouse is a financial institution that acts as a middle agent for buyers and sellers in financial markets such as share markets. They make sure transactions, such as trades, are completed smoothly. The clearinghouse validates trades, settles accounts, collects margin payments, regulates asset delivery, and reports trading data. The National Securities Clearing Corporation (NSCC) is the main clearinghouse for securities transactions in the US. In the futures market, clearinghouses are important for providing security and efficiency by handling multiple transactions for multiple parties.

The CHESS subregister is maintained by ASX Settlement and is one of two ways a shareholder can be identified as the legal owner of their shares. To be registered on CHESS, a shareholder needs a signed sponsorship agreement with a sponsoring broker, which is typically their broker or a settlement agent. A shareholder’s sponsoring broker manages securities transfers to and from an investor’s CHESS holdings, based on the shareholder’s instructions and under the terms of their sponsorship agreement. Read more about the CHESS subregister here.

The Chicago Board Options Exchange, known as CBOE, or Cboe Options Exchange, is the world’s largest options exchange. Founded in 1973, CBOE provides a platform for investors to buy and sell options, which are financial derivatives that give buyers/sellers the right to buy or sell an asset at a predetermined price without being obligated to complete the trade. The CBOE is home to the CBOE Volatility Index (VIX), a widely used indicator of market volatility. It offers trading across multiple asset classes and regions, including options, futures, equities, ETFs, and volatility products.

Capital is resources, like money, that companies use to invest or spend. It also includes assets used to generate income or value, such as equipment or real estate. Capital is needed to start a business and to buy assets, such as computers or machinery, to pay for operations, like staff payroll, and to invest in opportunities to grow the business. Companies raise capital in rounds, pitching for money from venture capitalists, angel investors, institutional investors, individuals and investment firms. After a series of capital raising rounds, a company may raise more capital by going public on the share markets through an IPO. An individual’s capital may include personal savings, loans, cryptocurrency, investments from individuals or institutions, dividends, or business profit.

A company can create two classes of shares that have different voting rights for shareholders. These dual-class companies typically have Class A and Class B shares. For example, Berkshire Hathaway’s stock has Class A (BRK.A) shares, costing around US$610,000 (at the time of writing) and Class B shares (BRK.B) - the ‘Baby Berkshires’ - costing around US$300. The Class B shares are aimed to be more accessible for investors who want to own whole shares rather than fractional shares. Investors who own Class B shares may not get voting rights, but they do receive dividends. Learn more about Class A, Class B and dual-class companies.

A company is a legal entity usually formed to operate a business. Some companies are worth a lot of money (think billions or trillions), so their ownership is split into shares. When a company goes public, their shares become available for investors to buy and sell through the share markets. To invest in a public company, investors can buy their stock, or an exchange traded fund (ETF) that includes the company.

A capital gain is the profit earned from selling an asset, such as stocks, real estate, or other investments, at a higher value than it cost to buy. It’s the positive difference between the selling price and the initial cost. Capital gains can be either short-term (held for less than a year) or long-term (held for more than a year). They are usually subject to being taxed, often with different rates for short-term and long-term gains.

Constituents, sometimes called components or members, are the individual companies whose stock makes up an index. The total value of the index depends on how all the constituents’ stock prices change. For example, the S&P 500 index includes 500 of the largest market cap companies in the US, and their combined constituents’ performance can be used to show trends in American consumer sentiment and the overall share markets.

Custody means the safekeeping of financial assets by a financial institution, such as a bank or investment firm, called a custodian. These assets can include stocks, bonds, and other securities. Custodians not only safeguard these assets but also handle administrative tasks, settlement of transactions, and compliance with regulations.

A common shareholder number, or CSN, is a 9-digit identifying number issued by the NZX for shareholders - found at the top of formal NZX documents. A CSN is unique to each shareholder, and shows they’re the legal owner of their shares. Some shareholders may have more than one CSN, but not every NZX investor has a CSN (this may depend on the brokerage); some may have an HN (holder number) if they bought shares through an investing platform rather than through a broker, and possibly a FIN (faster identification number). A CSN and an HN have similar purposes but are not quite the same. Both are unique identifiers used by the NZX. The CSN is common to the NZX, and distinguishes one investor’s holdings from another’s, while the HN specifically identifies a shareholder as the owner of a portfolio of securities. When an NZX shareholder wants to transfer their NZX listed shares to a different platform, they may need a CSN. Learn more about common shareholder numbers (CSN) on MoneyHub.

Cryptocurrency, or crypto, is a decentralised digital currency based on blockchain technology. Unlike traditional currencies like the US Dollar or the NZ Dollar, cryptocurrencies aren’t controlled by a central authority like a central bank. Instead, crypto relies on a network of users over the internet. People can use crypto to buy goods and services, but many people invest in them as if they were stocks or precious metals. Investors can consider cryptocurrencies as alternative investments due to their potential for high returns, but many acknowledge crypto’s volatility and lack of regulation. The first cryptocurrency was Bitcoin, introduced by Satoshi Nakamoto in 2008. Other well-known cryptocurrencies include Ethereum and Ripple.

A corporate action in investing refers to any event initiated by a company's management that brings about a significant change to the company’s securities and affects its stakeholders, such as creditors and shareholders. These actions can impact stock prices, liquidity, and overall company performance. There are two types of corporate actions: voluntary and mandatory. 

Voluntary corporate actions: Require a response from the investor - such as a vote for or against where investors may need to respond online or over the phone. Examples include:

• Equity tender offers
• Bond tender offers
• Exchange offers
• Rights offers
• Consent solicitations

Mandatory corporate actions: Don’t require any action from the investor as participation is obligatory, meaning the company’s board of directors (not the shareholders) approves the action. Examples include:

• Spin-offs
• Stock splits (both forward and reverse)
• Mergers and acquisitions
• Name or trading symbol changes‍
• Dividend distributions

A custodian is financial institution, bank or brokerage responsible for managing and safeguarding assets on behalf of investors. They ensure the proper handling of securities, cash, and other investments and play an important role in maintaining the integrity and security of financial markets. Learn more about custodial investing.