What is a CHESS Depositary Interest (CDI)?
are available on ASX but they are different from other ASX listings. Here we explain what they are, their benefits and how they are different.
What is a CHESS Depositary Interest (CDI)?
A CDI is the instrument developed by a subsidiary of ASX that gives investors the same beneficial interests in foreign companies and funds as holding these shares and funds directly on their foreign exchange. CDIs are available on ASX.
CDIs are only relevant for three VanEck’s US ETFs so Australian investors can access these US listed ETFs on ASX:
VanEck Vectors Gold Miners ETF (ASX: GDX);
VanEck Vectors ChinaAMC CSI 300 ETF (ASX: CETF); and
VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT).
This means that when you buy shares in these US ETFs on ASX you receive CDIs in your brokerage account on a one-for-one basis.
The above funds are principally listed on the New York Stock Exchange.
Without CDIs, shares in these US ETFs cannot be settled via the ASX CHESS electronic transfer and settlement system which means these funds could not be traded on ASX.
What are the benefits of CDIs?
The benefits of CDIs include:
Giving ASX investors access to some of the largest and most liquid ETFs in the world;
They make it easy to trade NYSE ETFs on ASX during Australian trading hours and in Australian dollars;
Providing access to established investment opportunities and exposures that are not available via Australian-based products;
Access to an experienced New York based global asset manager recognised as one of the world’s leading ETF providers;
Often the larger scale of the US ETF mean lower management fees;
Cost effective access relative to buying international securities directly; and
Dividends, bonus issues, rights issues and similar corporate actions flow through to CDI holders who receive all the economic benefits of the associated shares.
What are the risks of trading CDIs?
Investing in international markets has specific risks that are in addition to the typical risks associated with investing in the Australian market. These include currency/foreign exchange fluctuations, ASX trading time differences and changes in foreign regulatory and tax regulations.
What are the major differences between a CDI and other ASX listings?
This biggest difference is that Investors in CDIs receive what is called a W8-BEN Form. This is an US Internal Revenue Service (IRS) requirement and by completing this form you can leverage off the Australia-US tax treaty to reduce withholding tax on foreign income from 30% to 15%.
Also, CDI holders may not vote in person at any US ETF shareholder resolutions. Instead they direct the ASX subsidiary to vote on their behalf.
How do I access a CDI?
Exactly how you buy any other ETF or ASX security, through your broker.
IMPORTANT NOTICE: Issued by VanEck Investments Limited ABN 22 146 596 116 AFSL 416755 (‘VanEck’). This is general information only and not financial advice. It does not take into account any person’s individual objectives, financial situation or needs. Before making an investment decision, you should read the relevant PDS and with the assistance of a financial adviser consider if it is appropriate for your circumstances. PDSs are available at www.vaneck.com.au or by calling 1300 68 38 37.
No member of VanEck group of companies gives any guarantee or assurance as to the repayment of capital, the payment of income, the performance, or any particular rate of return of any VanEck funds. Past performance is not a reliable indicator of future performance.
United States domiciled ETFs: VanEck Vectors ETF Trust ARBN 604 339 808 (the ‘Trust’) is the issuer of shares in the US Funds which trade on ASX under codes CETF, GDX and MOAT. The Trust and the US Funds are regulated by US laws that differ from Australian laws. Trading in the US Funds’ shares on ASX will be settled by CHESS Depositary Interests (‘CDIs’) that are also issued by the Trust. The Trust is organised in the State of Delaware, US. Liability of investors is limited. Van Eck Associates Corporation based in New York serves as the investment advisor to the US ETFs. VanEck, on behalf of the Trust, is the authorised intermediary for the offering of CDIs over the US Funds’ shares and issuer in respect of the CDIs and corresponding US Fund shares traded on ASX.