The market participants in Australia wanting to chase the US stocks can now do so as they can now make deployments in the Apple Inc. (NYSE: AAPL) and 30 other US companies by the mid of the next year. Chi-X Australia has allowed to trade in the US stocks. From today, the trading in the US tech giant, Apple Inc., was supposed to commence via transferable custody receipts or TraCRs. This instrument would allow to make investments in the US stocks but in the Chi-X local exchange as well as in the Australian dollar.
One TraCR would mean that the concerned investor has one unit of the respective stock and thus, they can avail the benefits of the financial performance of that particular company. In addition, they can also claim dividends on the stocks listed on S&P 500. These receipts can be converted to shares however, after the fulfillment of the specific terms and conditions. Apple was selected as the first stock due to its technological advantage as well as because the company’s stock is the largest in the index (S&P 500).
In the Australian market, the technology sector makes up around 2% and hence, key personnel of Chi-X Australia decided to go with the tech sector.
The top management of Chi-X Australia reflected positive outlook on this move and stated that initiating the purchase via TraCRs would be efficient. Other personnel who started working with Chi-X Australia recently stated that the receipts would be helping the investors from the charges point of view. The investors who were getting a hit by the foreign exchange charges when they trade in the international stocks can now take a sigh of relief.
The investors are often charged 2-3% as the foreign exchange charges whenever they execute a trade. However, in TraCRs the charges have been reduced to only around 4-5 bps (basis points). The Australian markets have earlier tried a similar approach through UDRs or unsponsored depositary receipts; however, that idea was suspended. The primary factors which have been considered are that whether or not the new method is beneficial for the customers and whether or not they are scalable as well as cost-effective? All these parameters were not met in the case of UDRs.
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