Markets: USA - Pink Sheets

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Charles Schwab Global Account

Charles Schwab’s online global trading service is distinct from the international dealing option in its Schwab One Account and, unlike the latter, is only open to US citizens (US residents who don’t hold US nationality will apparently not be eligible). It offers online trading for 12 markets in Europe and Asia – some publicity material claims access to 30 countries, but this larger number refers to trading in foreign ADRs and OTC stocks, which is not the same as having direct access to an overseas exchange.

Fees are more competitive than the Schwab One telephone dealing offering. However, be aware of the currency conversion commissions (up to 1% over interbank rates) and also the 0.1% extra commission that Schwab’s local broker will add on – detailed rates are in Schwab’s fee guide [PDF]. On the plus side, this account has no minimum balance, other than requiring clients to already have a Schwab One account.

Overall, this is more realistic for smaller investors than anything Schwab offered previously, but it is still more expensive than Interactive Brokers and covers less markets than the similarly priced Fidelity.

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Phillip Securities Hong Kong

International investors comparing brokerage accounts in Asia should be aware that Phillip Securities Hong Kong and Phillip Capital Singapore seem to be run independently of each other and offer different services.

The Hong Kong arm offers more markets online than the Singapore division, but less markets overall. International investors looking for an offshore account to trade Asian markets may do better through its sister firm or OCBC Securities in Singapore.

However, this is still one of the better multimarket brokers around and worth considering, especially if you need to invest in Japanese markets other than Tokyo which are rarely offered by international retail stock brokers (fellow Hong Kong broker Boom Securities is also worth considering for this purpose).

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Haitong Securities (Taifook Securities)

I have received little feedback on this broker. If you would like to add any comments, please email me.

Formerly known as Taifook Securities, the firm was part of the New World conglomerate, controlled by billionaire Cheng Yu-tung. In 2009, it was bought by the Hong Kong arm of mainland brokerage Haitong Securities and renamed.

The company is a major provider of investment services into Hong Kong shares for mainland residents. Although it offers a good range of international markets, it is not routinely used by international investors.

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Boom Securities

Boom was one of the pioneers of online stock trading in Asia. Starting out as an independent with backing from investment banker William Hambrecht, it was bought by Japan’s Monex Group in August 2010.

Boom offers an extremely good range of Asian markets for online trading at rates far lower than any American or European investor will pay for these using brokers in their home country. Following the acquisition by Monex, it can apparently now deal on the Fukuoka, Nagoya, Osaka and Sapporo stock exchanges, making it one of the few discount stock brokers outside Japan to offer stocks not listed on the Tokyo exchange.

The firm is no longer the clear leader in Asia across the markets it covers – Singapore’s OCBC Securities and Phillip Securities are worth considering as well. However, it continues to get very good feedback for customer service and ease of use, and is still one of the best multimarket stock brokers around.

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Fidelity

Fidelity has recently overhauled its international trading service to the point where it may be relatively useful. Previously, you needed a minimum balance of US$25,000 and over 120 trades per year or a balance of US$1,000,000, which made it extremely uncompetitive since any investor who met those conditions could do better elsewhere.

But with the international trading service now open to all account sizes, a large number of new markets added and reasonable fees for online trades in most, it now seems to be one of the most competitive providers available to US investors, at least in terms of range (Interactive Brokers is considerably cheaper, but covers fewer markets). However, be aware of the usual excessive FX conversion fee (up to 1%) – investors should try to work around this as much as possible by avoiding changing currencies within the account too frequently.

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EverTrade

EverTrade is part of Florida-based EverBank, which specialises in postal, telephone and internet banking. It offers a large range of international markets – especially in Europe – for online and broker-assisted trading.

The service is roughly comparable to Fidelity in terms of reach and which one would work out as better value would depend on your individual trading pattern. Broadly, Fidelity looks cheaper for online trades in many circumstances, while Evertrade may be more competitive when placing orders through a broker.

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Charles Schwab One Account

This US online brokerage giant now has two international brokerage services: The Schwab Global Account, open to US citizens and residents only, and the international trading part of its long-standing Schwab One Account. The firm has never really advertised the latter much, but it can deal in a very wide range of overseas markets, albeit by telephone during US hours only.

Schwab One Accounts are available to clients outside the US, although the minimum account size will be larger – US$25,000 for most markets, US$10,000 through the Hong Kong and UK arms. Overseas dealing is likely to have a minimum of around US$5,000 per trade for some markets.

The main snag with the service is cost. International dealing rates are 0.75% with a minimum of US$100. While this is lower than rates at the wirehouses, you can do better than that for many of the markets it offers – within the US, try Interactive Brokers, Fidelity or Schwab’s own US resident-only Schwab Global Account. On top of this, its correspondent stock brokers in the overseas markets will add their own charges, include FX conversion (since you can only hold US dollars within the account). That will vary by market, but it’s likely to add 0.15-1.5% depending on region (Europe will be cheaper, emerging Asia more expensive).

That said, while nobody I know well has used Charles Schwab for buying international shares, second-hand feedback says the customer service is very good. Certainly, I was impressed with the knowledge of its representatives when I enquired about opening an account. At this price, I’d still say look for a cheaper broker for the easy markets. But perhaps consider this firm for the more exotic ones if you trade in reasonable size and the US$100 minimum is bearable.

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Saxo Bank (Saxo Markets)

Founded in Denmark in the early 1990s, Saxo Bank now offers services to investors around the world and is one of two truly global operators (the other being Interactive Brokers). The name can cause some confusion – this is a brokerage and investment bank rather than a traditional retail bank. For this reason, it is now known as Saxo Markets in some countries.

The firm offers more countries for online trading than any other firm in the broker database. Trading commissions are mostly reasonable, but fees vary greatly depending on which country your account is opened in, so check your local version of the Saxo website to clarify these. The exact markets available may also be different, due to regulatory restrictions.

The commission on currency conversions also varies, but has unfortunately now risen to 1% in some countries (it was previously 0.5%). Investors trading in and out of stocks in the same foreign currency frequently will therefore want to keep the proceeds in cash rather than transferring back to their base currency.

You can operate multiple foreign currency sub-accounts to let you do this, but these need to be set up individually for each currency you require. In some countries, there may be a minimum account size to open sub-accounts.

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Interactive Brokers

Interactive Brokers is a US-based firm with registered offices in a number of other countries, including the UK and Hong Kong, and is one of two genuinely global retail brokerages along with Saxo Markets. The firm offers extremely low-cost Direct Market Access to a large number of international exchanges in Asia, Europe and North America.

The underlying service is an institutional-level trading platform – it’s used by many professional traders and small hedge funds – and Interactive Brokers mostly markets its services to very active traders. However, non-traders shouldn’t be put off by that. This is a cheap and efficient solution for many long-term investors as well, with commendably transparent pricing.

There is a minimum monthly fee of US$10 for accounts under US$100,000, offset against commissions, but the low overall charges – including almost free currency conversion – mean that despite this the firm can still be a surprisingly cheap option even for relatively infrequent traders.

It is still difficult to recommend Interactive Brokers for inexperienced investors, as the technical support team will not walk you through everything with the same patience as a more retail-focused stock broker. That said, the web portal has become more user-friendly over the last few years.