SALONI SURI, Shareholder Analytics

An important question many IR professionals ask is – who are the owners of their company’s shares, and who is trading those shares?

Using Beneficial ownership analysis, we can help identify the investors that hold a company’s shares.

However, when it comes to trading by retail shareholders, identifying the brokers who influence their investment decisions is complicated by those brokers’ use of third-party settlement providers.

Historically, retail brokers were also ASX Settlement Participants. As each broker settled trades made by investors, it was easy to identify what brokers influenced the investment decisions of a company’s retail shareholders.

Third-party settlement providers oversee the clearing and settlement of share trades by both retail and institutional investors. They can also provide a variety of administrative functions that include account creation, HIN sponsorship and contract note distribution, among others.

The increasing use of third-party settlement providers has been driven by industry and regulatory factors that include a desire to better manage back-office administrative functions within broking houses, and an ability to redivert regulatory capital requirements that would have otherwise been locked up, had the broker been responsible for settlement activities.

Market data for trades executed using a third-party settlement provider does not identify the underlying Broker responsible for the trade. This is because third-party settlement providers act as a settlement and clearing agent for multiple brokers. For example, FinClear provides settlement for trades made by clients of many broking firms, including Bridges Financial Services, Canaccord Genuity Financial, Ord Minnett, Phillip Capital, Shaw and Partners, Taylor Collison, Velocity Trade, Wilsons Advisory and Stockbroking. Similarly, Third Party Platform (a wholly owned subsidiary of Bell Financial Group) provides settlement services for a number of products provided by Macquarie Bank and Bell Potter.

FIRST Advisers has developed a set of sophisticated tools to identify which brokers are responsible for investment decisions made by third-party settlement providers. The intelligence gained from these tools is essential for any IR professional who is wanting to engage with retail shareholders, as it provides them with a clear understanding of which retail brokers should be contacted to articulate a company’s investment thesis.