Choosing a broker for trading Singapore stocks
Saturday, May 14, 2011
Latest update: This post has been obsoleted by a new kid on the block. Standard chartered online trading brokerage has stormed into the Singapore brokerage industry with a whole new pricing. Here is my update.
One of the favorite questions asked by newbies to the stock market in Singapore is "who should I use as my broker"?
This is what I did for myself. I use DBS cash-upfront account primarily for buying Singapore stocks. The price comparison is compelling. DBS cash-upfront charges 0.18% of invested amount or minimum SGD18. This is way cheaper than (0.275% or minimum SGD25) charged by the rest. DBS cash-upfront is 35% cheaper than all the other brokers.
Why so much cheaper? Where is the catch?The key lies in being CASH-UPFRONT. You have to deposit cash upfront into an account with DBS Vickers to buy stocks. DBS Vickers is able to charge lower commission rates because the risk of customer not paying up for his share purchases is zero.
Please note that you Cannot Buy on Contra (buy now, pay 3 days later. Uniquely Singapore) with cash-upfront. That is the catch.
However, I hardly think this is a disadvantage. So far, I have never seen a consistent winner in the Singapore stock market using contra. Conversely, I have encountered and read about several market participants getting burnt using contra. It is hard enough to be a market timer. To get your timing right to an accuracy of 3 days is even harder. It is possible to make good profits in one or two occasions using contra. Who doesn't have luck on his side sometimes?
But to be profitable consistently by playing contra? I think you will have better chance of getting rich by working hard at your day job.
After shares have been deposited into your CDP(Central Depository) account which occurs 3 days after purchase, they cannot be sold using the cash-upfront account (they can still be sold within 3 days using cash-upfront).
So, for the sale of shares, you are free to use other brokers but will have to incur the higher commission rates of 0.275%. If you are a big customer, you can pressure your existing broker to charge you cheaper rates by using the cheaper cash-upfront rates to bolster your bargaining position. Congratulations if you are successful. However, please be very careful when you are using one broker for buying and another broker for selling. It is easy to become confused during periods of active trading and you may accidentally do a naked short-sell. The penalties for naked short-selling in Singapore is hefty. In the worst case, it can be a minimum of SGD1000 or 5% of trading value.
I have accounts with several brokers. This is because of the bad experience with the inadequate reliability of the online trading platform of Singapore brokers, especially on days when trading volume is high. By having several brokers, if you cannot log in on one particular online account, you can still try the others.
Having said that, it is best to keep your trades to one broker, at most two. The buy/sell limits granted by the Singapore broker depends on the volume business he gets from you. If you need more firepower, you have to fire more shots using the same broker.
By using one broker exclusively, you can use that broker to track your portfolio accurately and keep good trading records. A good online platform should update the portfolio automatically. Trading records are vital to traders who want to become good traders. I doubt if any experienced traders reading this post will disagree with that.
http://help-your-money.blogspot.sg/2011 ... apore.html
http://www.dbs.com.sg/personal/investme ... fault.page
candy_chia wrote:For small quantity of shares purchased, this is a sweetener with NO MINIMUM COMMISSION of $18 to $25 that are generally charged for each trade transacted.
This implied that there is a flexibility to purchase shares in stagger lots and thus spread the risk, especially for those who want a huge selection of shares in their portfolio.
$1,000 worth of shares only incurs commission of $2.00 (0.20%) if trade is executed via standard chartered, compared to $25 minimum brokerage fee usually imposed.
Since shares are held by Stanchart through custodian account, so there is a risk that we will lose all $$$ if stanchart experiences financial difficulty.