Alternative listed securities and derivatives exchange market Chi-X has struggled to interest investors in its range of US company transferable custody receipts (TraCRs) but it is determined to persevere with the product. In fact, it has just launched some new ones.
Since launching in October 2018, Chi-X has recorded just 700 trades. It points out, however, that it has doubled its trading volume in the last three months.
Vic Jokovic, chief executive of Chi-X says: “It is slow but it’s picking up. We’d give it a five out of 10 so far. But as we ramp up the number of names, we are hopeful that volumes will kick along quite nicely.”
This level of trading is minor compared to Chi-X’s exchange, which handles an estimated one million trades per day worth roughly $1.3 billion.
TraCRs were developed by Chi-X in partnership with Deutsche Bank. The idea is to give Australian investors access to leading global companies, with the protection of trading on a local market.
They give investors a beneficial interest in Apple Inc shares. Investors get exposure to the financial performance of the underlying shares and the benefit of certain rights attaching to the share.
Jokovic says: “This is a small part of our business, but it is different, new and unique. It was never going to be easy, but it is not stagnant, it is growing.
“It took a couple of months to get a trade and now we are getting trades every day, soon we will have hundreds every day.”
The most popular TraCR by volume is Disney, with over 150 trades. Microsoft has had over 100 trades, followed by Berkshire Hathaway and Apple.
Chi-X has just launched five new TraCRs, bringing the total to 20. The new listings include those based on the shares of equipment company Caterpillar, fast food restaurant McDonald’s, streaming service Netflix, coffee chain Starbucks and payments company Visa.
Jokovic says: “The rationale for TraCRs is giving retail clients easy and efficient access to corporate names.”
Chi-X is committed to increasing the brand awareness around the product. Jokovic says: “The issuer, Deutsche Bank, is out talking to the client base about the product and Chi-X is talking to the broker base.”
The listings are based on broker demand and Jokovic expects 10 to launch later this month and an additional 30 listings in the coming months.
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.”
TraCRs are quoted and traded on Chi-X’s market in Australian dollars. They are settled through CHESS and are held on an 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 through more than 20 brokerage services, including CommSec, OpenMarkets, State One Stockbroking, Westpac Online Broking, ANZ Share Investing, Bell Potter, Morgans, Evans & Partners, Velocity Trade, Amscot Stockbroking and Wilsons Advisory.
Jokovic says: “The significance of having CommSec is that it holds 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.”