New securities offer Australian investors access to US equities

Oct 25, 2018
Overseas opportunities make access crucial to underserved markets

Investors on Australian time could soon take back the night using investment securities known as TraCRs to buy and trade US shares at any time of day.

The instruments – pronounced ‘tracers’ and short for Transferable Custody Receipts – are the product of a partnership between pan-European equity exchange Chi-X and Deutsche Bank to make it easier for Australian investors to access overseas equities markets.

According to Vic Jokovic, CEO of Chi-X, household names such as Amazon, Apple and Facebook are attracting global investors that are ‘increasingly becoming self-directed’ yet typically need a US account to get into certain markets.

‘There are extensive forms and long set-up times for accounts, with some brokers telling us it can take eight to 12 weeks to set up a new account to access shares globally,’ Jokovic says.

According to a report by Deutsche Bank’s in-house journal Flow, many large tech firms remain on the list of top picks for self-managed corporate pension funds. But the Australian Securities Exchange’s ASX 200 Index favors sectors that take small account of technology-led changes in consumer behavior. Around a fifth of daily trading volumes in the Australian financial markets are on securities and derivatives exchanges, leaving scope to broaden their horizons.

As part of the partnership, Chi-X will be responsible for trading and promoting TraCRs through the exchange and its website, while Deutsche Bank, acting as a global depositary bank, will issue and service the transferable receipts.

Meanwhile, passive investment in shares has also increased: the Australian exchange-traded fund market has increased from 16.7 percent of total equity investment to more than 43 percent since 2013, of which slightly more than a third takes place on Chi-X.

Chi-X has plans to roll out Asian TraCRs in future, though Jokovic says it remains opens to many products in underserved markets that it feels are necessitated by demand.

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