Behind the scenes: Sharesies’ investment process

So you’ve signed up to Sharesies, topped up your Wallet, and made your first investment—nice one! What you don’t see is that there’s a whole lot happening behind the scenes to make sure your investment makes its way safely into your Portfolio.

To help demystify the process, we thought we’d give you a look into what typically happens when you place a buy or sell order with Sharesies.

But first things first…

Sharesies offers the ability to invest in managed funds, exchange-traded funds (ETFs), and companies. ETFs and companies follow the same order process, while managed funds have a separate order process. Here’s how it all works!

ETFs and Companies

Step 1: You place an order! 💖

This is the bit that you see! You might be buying a new investment, or selling an existing one. Once you’ve placed your order, it gets received by us here at Sharesies.

Step 2: Your order goes through Sharesies Market Service ✅

Sharesies Market Service is the system that connects us to the NZ Stock Exchange (NZX). It’s also the system that decides if your order will ‘go to market’ or not!

When we receive your order, Sharesies Market Service asks a couple questions:

  1. Is the NZX open?—The NZX is ‘the market’ where buyers and sellers come together. We can only send orders to the market when it’s open, usually between 10 am and 4.45 pm Monday to Friday. If the market is closed, your order will wait until it’s open again.

  2. Does a human need to have a look?—We might need to take a closer look at your order for a number of reasons, and decide if it’s good to go to market.

If an order is waiting to be approved, or we're waiting for the market to open, it'll show as 'pending'—you can cancel a pending order. In all other cases, your order will go straight on market!

Step 3: Your order goes on market—woohoo! 🎉

Sharesies Market Service uses an algorithm to try and get you the best available price for your order, without causing any issues in the market...also known as ‘price discovery’. You can read about our best price policy in the ‘Settings’ part of Sharesies.

Price discovery involves looking at things like the last traded price, market conditions, and availability of buyers or sellers—and then making adjustments until we find a price to trade at within a limit that we set. Orders placed through Sharesies are automated, so your order fills as quickly as possible. A Sharesies dealer will only intervene if your order needs a helping hand!

Sometimes, we can complete your order in a single trade, straight away. Other times, we might need to make multiple smaller trades to complete your order—this is called a ‘partial trade’. This also means that your order might be completed by partial trades, at different prices.

Orders, or partial order that are waiting to be filled are called ‘processing orders’—you can cancel processing orders, if you want! If an order remains unfulfilled for 30 days, we’ll cancel the unfulfilled parts of the order and refund the money back into your Sharesies Wallet, where you can place another order if you wish.

Step 4: Your order appears in Sharesies! 🍍

When your order is filled (either partially or fully), you’ll see your investments (if you’re buying) or money (if you’re selling) appear in Sharesies. You’ll also be able to see a contract note that gives you all the info you need to know about your order and the trade that took place. In many cases, this will happen as soon as you place your order!

Step 4 (again!): Your order goes to the NZX Clearing House 💸

Your order’s completed and your Portfolio is updated. Awesome!

Meanwhile, Sharesies has an obligation to settle your trades with the NZX Clearing House. The NZX Clearing House sits between Sharesies and the buyer or seller on the other side of your trade. It’s responsible for making sure that all trades happen, and manages the risk of having heaps of different people trading with each other.

When we settle your buy order, we give the Clearing House your cash to pay for the order, and the seller on the other side gives the Clearing House the shares. When the Clearing House has the cash and the shares, they pass them on to the buyer and seller. This usually happens 2 working days after the order (or part of the order) has been completed—also known as T+2 settlement.

Don’t worry though—this is only a behind the scenes process! It’s just us doing our bit to keep your money and investments safe.

Next up, how does the order process for managed funds work?

Managed Funds

Step 1: You place a buy or sell order! 💖

Step 2: Sharesies confirms your order ✅

At around 12:30pm each working day, we go through a process we call order and settlement. This is when we confirm all the buy and sell orders that our investors have made since we last did order and settlement. This is also known as a settlement group.

When you buy or sell an investment, you join a settlement group based on the time you placed your order. For example:

If you place an order You'll be part of
At 11am on Monday morning That day’s 12:30pm settlement group
At 1pm on Monday afternoon Tuesday’s 12:30pm settlement group
After 12:30pm on Friday, or during the weekend Monday’s 12:30pm settlement group

At around 12:30 pm, the price for the units you bought or sold are locked in. For a buy order, we buy you as many units as possible for the dollar value of your order. For a sell order, we sell the number of units you've specified.

Step 3: Your order gets processed 💸

Once we’ve confirmed your order, we let the fund managers (like Pathfinder and AMP Capital) know. When we start settlement each working day, we send our order to each respective fund manager. For each managed fund we have on Sharesies, we send two different orders—the buy orders in New Zealand dollars and the sell orders in Units. The unit price is confirmed by the fund managers at the end of the process.

Step 4: Your investments are recorded and settled ✍️

Share registries work on behalf of fund managers to record changes in ownership, dividends, and statements (among other things!):

  • AMP Capital uses BNP Paribas

  • Pathfinder Asset Management uses MMC

Once the share registries have recorded any changes, they send us a confirmation called a contract note. This contains the order information for each settlement group and all the funds within it—including the number of units, price per unit, total trade value, and trade date.

When we receive a contract note, we check the info we’ve been given against all the records that we hold for individual investors. Once we’ve confirmed that everything aligns, we can settle the order—this is when your investments (if you’re buying), or money (if you’re selling), appear in your Sharesies Portfolio!

Step 5: Your order appears in Sharesies! 🎉

Managed funds follow T+2 settlement. The ‘T’ stands for trade date and ‘+2’ means plus two working days. For example, if your order is processed as part of Monday’s settlement group, Monday will be your trade date—plus two days means you can expect your order to settle and appear in your Sharesies Portfolio on Wednesday.

There are a lot of moving parts to make sure your investments get through to your Portfolio! We hope this has given you a better insight into the investment process on Sharesies.

Get in touch at [email protected] if there’s anything else you’d like to know more about!