How To Buy and Sell Shares

Your broker or online-broker receives your order and this is entered into ASX’s Stock Exchange Automated Trading System (SEATS). Buy and sell orders are sorted firstly by price, then by time. The system does not differentiate between brokers and online brokers, or the size of the transaction. Based on a first in, first served basis, when orders are matched, there is a simultaneous buy and sell. It might be simpler to think of the ASX is a place to match buyers with sellers.

Settlement periods

Some things to keep in mind are the settlement periods. The ASX settles all trades on a T+3 basis, which simply means to transfer of ownership of the shares and flow of funds between the buyer and the seller occurs on the third ASX business day after the trade takes place. This does not mean investors are unable to trade the shares before settlement – they can be traded within this three day period but the settlement can be offset with any subsequent sales or purchases.

All ASX shares are registered electronically on either the Clearing House Electronic Sub-register System (CHESS) operated by ASX Settlement and Transfer Corporation (ASTC), a subsidiary of ASX, on behalf of listed companies or on the companies’ own sub-registers.

CHESS sponsor

If you elect your broker as your CHESS sponsor, you will get one HIN for each broker that sponsors any of your shares. Alternatively, you can hold shares in an issuer sponsored form on the issuer sponsored sub register, which will produce a SRN for each parcel of shares you own. This alternative has the advantage of placing orders to sell without the need to provide the relevant SRN.

Your CHESS sponsor has access to the relevant HIN and can sell your shares without having to first contact the company’s registry to confirm your ownership. A common way for brokers to simplify the trading process is accept your shares as security for amounts outstanding on future purchase orders, or as security for a margin loan. This also assist as you have a list of all your shares sponsored by a particular sponsor on one consolidated statement, and many brokers provide financial year end statements which are a definite help at tax time.

Checklist before you place an order to buy or sell shares

Is there a minimum order amount
Where are the funds coming from, if you are buying?
If you are selling, what is the HIN or SRN?
How do you want the funds to be paid, if you are selling?
How many shares do you want to buy or sell?
With the share price, are you executing at a market price or a limit order? If it’s a limit order, specify the price.
Is your order valid for the trading day? What if no order takes place, do you want to keep the order in place or change any details?
Will the contract note come in the post or by email?
What is the brokerage rate for the order?

And just remember, at the end of the day, you will receive notices and reports which may be overwhelming. As long as you have a system, are organised from the beginning and sticking to your investment strategy, things will be much easier and simple, especially around tax time