What happens when you DRS shares?
The Direct Registration System (also known as “DRS”) is a system for book-entry ownership. DRS offers investors and shareholders an alternative to receiving a physical certificate, by allowing the shares to be record, held and transferred electronically on the books of the company or its transfer agent.
Direct Registration System. A system, sometimes referred to as DRS, that allows electronic direct registration of securities in an investor’s name on the books for the transfer agent or issuer, and allows shares to be transferred between a transfer agent and broker electronically.
You may sell your shares through the DRS Sales Facility, administered by Computershare Trust Company, N.A. The types of sale orders available may be different for each company. You may go online at www.computershare.com/investor or call Computershare to find out what order types are available.
Protection against risk: Using a DRS provides you with protection against counterparty risk. You’ll have to go through the recovery process through SIPC insurance if your stockbroker goes bankrupt, and if your shares were held in a street name, but ideally you’ll receive a reimbursement.
More recent data from May are not yet official, but GameStop’s shareholders estimate on Reddit that the number of shares locked up through DRS already exceeds 14 million shares.
You can transfer stocks and cash to other brokerages through ACATS (Automated Customer Account Transfer Service) transfer. If you want to keep your Robinhood account, you can initiate a partial transfer. Otherwise, you can initiate a full transfer, and we’ll close your account once the process is complete.
Why GameStop Shareholders Are Using DRS. Using DRS can provide transparency to an individual investor’s asset ownership. Thus, some GameStop shareholders see in DRS an opportunity to protect their shares from possibly dubious trading practices.
How long do DRS transfers take?
It can take up to five business days for a transfer agent to deliver the requested shares. Additional documentation may be required for some Over-the-Counter/Bulletin Board (OTC/BB) securities before a request is submitted.
If you find yourself in possession of old stock certificates, you have a few options for selling them. You can cash them in through the transfer agent of the company with which the stock is owned. Or, you can work with a broker to sell the stock.
If you want to sell your securities through your broker, you can instruct your broker to electronically move your securities via DRS from the books of the company and then to sell your securities. Your broker should be able to do this quickly without the need for you filling out complicated and time-consuming forms.
Brokerages are able to lend out your shares to short sellers. In many cases broker-dealer can also rehypothecate – borrowing against assets that have been posted as collateral by their clients. After the 2008 crash, rehypothecation was limited to 140% of the loan amount.
Holding shares in book-entry form through DRS has the following benefits: (a) It helps reduce the risks and costs associated with storing share certificate(s) and replacing lost or stolen certificate(s). (b) It enables electronic share transactions between your broker/dealer and the FFC’s transfer agent, AST.
The transaction will occur within five business days after your funds are received by Computershare, assuming the applicable market is open for trading.
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