Investment Brokerage Firm: What Is It All About?
What’s the first thing that you need to start investing in shares aside from capital? It’s an account at an investment brokerage firm. There are many options to choose from, and how you choose should be based on factors like how much you intend to trade and what markets you want access to.
You don’t have to stick to just one investment brokerage company as your needs may change. Here’s what you need to know about investment brokerage firms in Singapore and how to choose one that’s right for you.
What is an investment brokerage firm?
An investment brokerage firm acts as a platform and middleman that allows investors to buy and sell shares in the stock market.
The service isn’t free and you need to pay a commission or fee whenever you buy and sell. Depending on how you trade (i.e. trading volume and frequency), you may find certain firms a better fit than others.
Once you have decided upon an investment brokerage, you will need to open a Central Depository (CDP) account before you begin trading.
The Central Depository Pte Ltd is a subsidiary of the Singapore Exchange Ltd (SGX) which provides clearing, settlement, and depository facilities in the Singapore securities market.
The process is simple and straightforward. You only need to open the account once regardless of how many brokerage firms you use and you can do so either directly with SGX or through the brokerage firm.
|Brokerage Firm||Minimum Commission Fees||Trading Fees||Foreign Markets|
|CIMB Securities||S$25||0.275%||0.22%||0.18%||Malaysia, Indonesia, Thailand, Hong Kong, U.S.|
|Citibank||S$28||0.25%||0.20%||0.18%||U.S., Hong Kong|
|DBS Vickers||S$25||0.28%||0.22%||0.18%||U.S., Canada, U.K, Australia, Japan, Hong Kong|
|KGI Securities||S$25||0.275%||0.22%||0.18%||Taiwan, Malaysia, Hong Kong, China, U.S.|
|Lim and Tan||S$25||0.280%||0.22%||0.18%||U.S., Hong Kong, Malaysia, Australia, Japan, South Korea, Thailand, Philippines, Taiwan, Shanghai, Shenzhen|
|Maybank Kim Eng||S$25||0.275%||0.22%||0.18%||Malaysia, Hong Kong, Shanghai-Hong Kong, Thailand, Vietnam, Philippines, Indonesia, North America, East Asia, Australia, Shenzhen-Hong Kong|
|OCBC Securities||S$25||0.275%||0.22%||0.18%||Australia, China B, Hong Kong, Indonesia, Japan, Malaysia, Philippines, Thailand, UK, U.S.,Canada, Korea, New Zealand, Taiwan|
|Phillip Securities||S$25||0.280%||0.22%||0.18%||Over 23 markets, including markets in Europe, Turkey, Sri Lanka|
|RHB Securities||S$25||0.275%||0.22%||0.18%||Malaysia, Hong Kong, U.S.|
|SAXO Capital Markets||S$15||0.120%||0.12%||0.12%||Over 23 markets|
|Standard Chartered||S$10||0.200%||0.20%||0.20%||Australia, France, Germany, Hong Kong, Japan, Netherlands, Switzerland, UK, USA|
|UOB Kay Hian||S$25||0.275%||0.22%||0.20%||Malaysia, Hong Kong, U.S.|
CDP Vs Custodian accounts
There must be two brokerage firms that jump at you when you look at the table – Saxo Capital Markets and Standard Chartered.
With low minimum commission fees and low trading fees, you are asking the right question if you are wondering what the catch is.
Basically, unlike the other brokerage firms where your shares are held in your CDP account, Saxo and Standard Chartered hold your shares in exchange for offering you lower fees.
The firms will act as custodians and hold stocks under their own name. The obvious perk is that you pay a lower fee, which is an attractive point for beginners who want to avoid high fees while they get a hang of the basics.
On the other hand, you may mind the following differences when using custodian accounts.
No Annual General Meeting (AGM)
Since shares are not bought under your own name, you will not be invited to attend the AGM of the company whose shares you have invested in.
This may be a non-issue for many, but some who have serious interest in the company may want to have a say or to get to know the management.
Inability to trade with another brokerage
If your shares had been deposited into your CDP account, you could use any other brokerage firm to trade. For example, you could buy shares of a company with DBS Vickers and then sell your shares through UOB KayHian.
When you use custodian accounts, you lose the ability to do that. However, this applies only to shares in Singapore, as shares in foreign markets will have to be put in a custodian account anyway.
Apart from SAXO and Standard Chartered, most other brokerage firms have more or less the same charges. How you choose your firms to trade with will also depend on how many international markets you want to get access to, and how user-friendly the interface is to you.
Some of these brokerage firms have trading interfaces that seem quite outdated and complex, while some may be clean-looking and easy to use. In addition, some firms like DBS Vickers and POEMS (Phillip Securities) also have investment analysis tools available on their platform, which help you to make better decisions.
Choosing an investment brokerage firm isn’t something that’s done once in your lifetime. It’s worthwhile to review the existing or new players to ensure that you’re using the best option for your investment needs.