Saturday, June 11, 2011

Standard Chartered Online Shares Trading Brokerage in Singapore

Update (21 Jul 2012): Clients lose their voting rights in shareholders' meetings when their shares are held in the SCB nominee account. I came to know about this when I was not able to vote against the takeover of Nera Telecommunications by ST Electronics. I felt bad about this after calling upon fellow shareholders to vote against the takeover but was not able to act on my own call.

This week, Standard Chartered has announced a new online trading with a pricing structure which will shake up the brokerage industry in Singapore. The cheaper pricing will be good for retail investors and SGX as it will stimulate trading volume. To paraphrase the Jedi Masters, I sense a disturbance in the Force.

The easy part in evaluating this new platform is finding what is good about it. The promoters will blare out their strengths with a loudspeaker. The difficult part is finding out the things to watch out for beneath their strengths. For this, you have to dig hard and ask questions to get answers which are not readily available.

Since I have a personal interest in getting the best offers from brokers, I have been digging for information this week. I will share what I found here. I will pay more attention with what makes me not so comfortable because it is more important as discerning customers to know what is not so good rather than what is good. However, I will state upfront that I am very pleased with what I learn so far with the new online platform from Standard Chartered bank. Even though my account is still not activated yet, I would like to express a big thanks to the new online SCB(standard chartered bank) trading platform.

Commission rates for the SCB platform are highly competitive versus the other brokers. For the Singapore market, SCB commission rates are 0.18% of traded amount if you are a priority banking customer and 0.2% if you are not. 0.18% matches the DBS cash-upfront account which I earlier recommended. In fact, for trading Singapore stocks, its closest competitor is the DBS cash-upfront account.

The SCB platform beats the DBS cash-upfront account on some aspects. Firstly, the 0.18% commission applies for both buy and sell transactions. In contrast, DBS cash-upfront can only be used on buy transactions. After the shares are deposited into CDP, 0.18% does not apply (unless you sell within 3 days before the shares reach CDP).

If you cannot qualify as priority banking customers, DBS cash-upfront is still cheaper. To qualify as priority banking customers, you have to put in at least SGD200k with SCB. I have checked with SCB that shares held in their nominee account can also be counted as assets to qualify as priority banking customers. Otherwise, it will be a problem after customers become fully invested.

Like the DBS cash upfront account, you have to deposit cash upfront to be able to buy stocks. In other words, no contra-trading.

The major pricing advantage SCB has over all other Singaporean brokerages is NO MINIMUM COMMISSION. 'No minimum commission' is a wonderful thing for small, young retail investors who cannot afford to trade in reasonably large amounts to minimize brokerage fees as a percentage of the investment. It will save money for small and disciplined investors who practise dollar-cost-averaging in the Singapore market. The minimum commission has been a sticking point for Singaporean retail investors who want to buy illiquid penny stocks (some of them can be neglected, value stocks). Sometimes, I end up paying the minimum commission of SGD25 on a tiny SGD200 transaction of an illiquid penny stock. This works out to more than 10% of the investment.

On first look, SCB commission rates charged for foreign markets look like a winner compared to the other brokers. Don't jump to conclusions yet. One has to factor in the currency exchange rates. From my experience, the exchange rates offered by brokers are much better than banks. If SCB uses the bank rates, then it is no longer as cheap as what it appears. I cannot confirm on the exchange rate until I start using the account (not activated yet). Anyone knows better out there?

One advantage of SCB platform compared to other Singaporean brokers for foreign markets is that a nominal interest is earned in the settlement account. I have checked with SCB that the interest rate is 0.1% for all currencies (even for the Aussie dollar). This is low but still better than the other Singaporean brokers that I know who pay zero interest. However, compared to other US brokers like Interactive Brokers, it is not as good. For example, click here to find out what Interactive Brokers is paying on the various currencies in their accounts. To enjoy better higher interest, one way is to open foreign currency accounts with SCB and shift your idle funds from the settlement accounts to the foreign currency accounts which enjoy higher interest rate during periods when you want to stay out of the market. This is important for the Australian market as the Aussie dollar currency enjoys one of the highest interest rate in the developed world.

Another advantage of buying foreign shares using SCB is that there are no custodian fees to be charged on the shares held in the nominee account unlike most other Singaporean brokers with the exception of  DBS Vickers.

On pricing, SCB is considerably cheaper for the Australian, Japanese and European markets compared to the other Singaporean brokers. If the currency exchange rate is reasonably good, then it is a no-brainer to use SCB online brokerage (among the Singapore brokers) for trading foreign equities. I will still use a US broker for trading US stocks.

Singapore shares bought using SCB platform are stored in a nominee account unlike the rest where shares are deposited into our CDP account. There are some risks to consider;

1. You can only sell your shares using SCB because shares are not deposited into the CDP account. One may face the risk of not being able to sell out on a high-volume panicky day because the IT system fails due to heavy traffic. Traders hate to be stuck in their positions, particularly when they want to sell. Compared to the US brokers, Singapore brokers still have much room for improvement in terms of the stability of their IT infrastructure on high-volume trading days. Experienced Singaporean investors will know what I mean.

I called up the SCB hotline and the customer officer told me that in such an event, customers can phone the bank and execute their trades. The commission will still be the same rate as online trading if it is their system's fault. However, it is highly doubtful if the phone service will be able to take in the traffic should their website break down on a high-volume day.

By the way, the hotline number is 1800 242 5333. Don't call their general helpline number because the customers officers manning that line are not knowledgeable on online trading matters.


2. Are clients' assets protected if SCB becomes bankrupt? Are they segregated into a safe, untouchable account in which the custodian cannot use it for their own purposes? The hotline officer told me that SCB cannot touch our shares in the custodian account. The chances of SCB becoming bankrupt is remote. There are those who argue that Barings bank, Lehman Brothers, Bear Stearns have gone bankrupt. Never say never. However, big banks do not go bankrupt overnight. There will be ample warnings signs in the newspapers to signal us to get our money out. Besides, SCB is a big bank and their big size gives me confidence. The events of 2008 has shown us that in the banking industry, the Darwinian rule survival of the fittest does not apply. Survival of the fattest (too big to fail) is what matters.

3. Can clients still exercise their voting rights as shareholders when their shares are kept in a nominee account? How about charges for corporate actions? I was assured that by the hotline officer that there will be no charges for corporate actions. However, clients will lose their power to vote in shareholders' meetings. Therefore, the SCB brokerage account is suitable for small-time retail investor but not suitable for the big players who are accumulating shares for control.

One thing I like about a nominee account is that the risk of a accidental short-sell is removed. The system knows exactly how many shares you own and should prompt you if you try to sell more than you own. This is what happens with my US broker and I expect the same thing for SCB platform. The SCB platform does not permit shorting.

The usual disclaimer applies: Do your own due diligence before believing my words. I am not paid to advertise or advise. So, don't hold me responsible for bad advice. I will be grateful if readers can correct factual mistakes or unintended misconceptions.

60 comments:

  1. Thank you. It is one of the most informative post so far on the Standard chartered online trading account.

    Do keep us updated when you start using this account.

    My primary worry now is whether their IT system is stable or not to handle high traffic. I will expect several Singaporean retail investors to migrate to this new platform. The pricing is simply too compelling. Keeping my fingers crossed.

    ReplyDelete
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  2. Hi, your Q2:-
    "2. Are clients' assets protected if SCB becomes bankrupt? Are they segregated into a safe, untouchable account in which the custodian cannot use it for their own purposes? What is the legal status of clients' assets in a bankruptcy? I do not know the answer to these questions. Can some readers help?"

    I am very curious about the above too. So this morning i went to talk to one of SCB's financial officer. Her reply was our nominee share accounts became their liabilities. Another words our nominee's accounts became their "assets" too. Ha! Ha! HUH?
    So i, "What is our MAS take on this"?
    She replied, "You have to check with MAS".
    What do you think?
    Do you think i have open an INT. Securities Trading Account with SCB?
    Ha! Ha!
    And what the heck is our MAS or our GOV. Regulator for? For protecting the common people or for "themselves"?
    Any one bother to confirm with "MAS" or our "CHAT LEOW BEE Commercial Regulator"?

    ReplyDelete
  3. Hi,
    I google about nominee share accounts held by banks or brokerages; the answer is not positive. The shares are not registered in your name but in SCB's. So the answer is quite clear. Don't play, play just to save a few $s.

    ReplyDelete
  4. Hi Temperament,

    I don't understand the disadvantages of nominee share accounts well enough to comment meaningfully. However, I know that quite a number of substantial shareholders in Singapore public-listed companies use nominee accounts to hold their shares. You can see that from the insider transactions announcements on SGX that show them moving their shares in and out of nominee accounts. Maybe nominee accounts aren't that bad if these people are using them.

    Up till now, it is a mystery why these substantial shareholders would want to hold their shares in nominee accounts. For those more knowledgeable readers out there, please enlighten me. Thank you.

    ReplyDelete
  5. Hi Temperament,

    If you have an existing Standard Chartered bank account, you can write to them using the mailbox. My experience with the banks is that the answers you get in writing is more accurate than what is being given verbally. Maybe you will get a better answer than what you got this morning if you write to the bank.

    ReplyDelete
  6. Hi hyom,
    You can google or yahoo, then you will understand more. They even talk about what happened to nominee accounts in "Lehmond Brothers" when HE(LB)went to sleep forever.

    When i talked with SCB's Financail Officer this morning, she also recommended me to move in/out i.e. my SCB's nominee account to personal's CDP account to my SCB's nominee account to my personal's CDP account.............and so on. i think this is only worth your while if you trade quite often and quite a lot.
    But what happens when you move your cdp account into your SCB's nominee account and then SCB like LB went to sleep forever. SAD, if it happens.

    ReplyDelete
  7. To all readers out there,

    There is a hotline for asking questions regarding SCB online trading at 1800 242 5333. The staff manning this hotline are trained personnel in this area and can answer questions related to the online trading platform competently. I am satisfied with the answers. The hotline is available until midnight.

    Don't call the general hotline. The customer care officers are not knowledgeable on this online trading service. The first officer I talked to did not pass me the correct hotline. She just told me to call another day during office hours. Thankfully, the second one gave me the hotline number.

    ReplyDelete
  8. Hi,
    If you want to know what is going to happen to your share nominee account when the Institution where you open the account goes kaput, go and google and you will know what will happen to your account:-
    First, the account will be frozen then..... please go and google. You don't have to listen to anybody. Me included.
    This is a WWW's world man. Nobody should be able to hide behind "smoke-screen" or "sweet talk" anymore. Please go and google.
    After google,if you think this is O. K. lah, then go in. At least you know what you are facing.

    ReplyDelete
  9. Hi Temperament,

    Thank you for your kind intentions in reminding me about the risk. Don't be mistaken that I don't believe you about the consequences.

    I have googled as well as call up the hotline and I will definitely give the SCB online trading a try.

    ReplyDelete
  10. Hi hyom,

    Any findings on the exchange rate? Is it using very bad bank rates (e.g. credit card FX rates with 5% spread)?
    Deposit Account --> Settlement Account
    Deposit Account <-- Settlement Account

    Thanks.

    ReplyDelete
  11. Hi Anonymous at Thursday, June 23, 2011 3:02:00,

    Sorry, I have not tried it yet because of sudden surge in problems in the office lately.

    If you have a SCB online trading account, you can try it out yourself. An actual transaction need not be made. An indicative exchange rate should be shown before confirmation. Then, compare the exchange rates with the other brokerages like iOCBC or UOB-Kayhian.

    Do tell me the findings if you have tried it. Thank you.

    ReplyDelete
  12. Hi hyom,

    I noticed there is a "Rates" in iBanking. I suspect they use that. It is about 2+% spread for some of the currencies I checked.

    Effectively an additional 2% sales charge?

    ReplyDelete
  13. Hi Anonymous at Friday, June 24, 2011 10:50:00 AM GMT+08:00,

    Thank you for the information. I think you are right. I cannot confirm today because the website does not allow foreign exchange transaction on Sunday. However, I do remember that the rates were about 1.7% spread for AUDSGD when I tried it on Friday night.

    For other readers, to get to the SCB foreign rates page, click "Rates" at the left-hand side. Then, click 'Foreign Exchange Rates'.

    I just compared the SCB FX rates with iOCBC. As an example, one can buy AUD1.00 for SGD1.3057 using iOCBC. With SCB, one has to pay SGD1.3214 for each AUD1.00. SCB exchange rate for Aussie dollars is 1.2% more expensive than iOCBC. The rates were taken from the respective website today.

    Please correct me if other readers know better.

    ReplyDelete
  14. Hi hyom,

    I'm still the same Anonymous talking about FX rates.

    My simple calculations show that SCB is not such a good platform for investing in foreign markets after all, due to its FX rates.

    It's really a pity. I was quite excited when SCB announced the launch of their trading platform. But now it turns out that they are just another option and NOT a better option.

    ReplyDelete
  15. It seems that some stocks cannot be traded using SCB online trading. From my experience, they are the penny stocks. The frustrating thing is that SCB does not provide a list of stocks that cannot be traded. Also, the banking website could not be logged for a short time yesterday during the late morning just when I wanted to trade. Lousy!

    Hyom, do you have the same experiences on your side?

    ReplyDelete
  16. http://123etfportfolio.blogspot.com/

    ReplyDelete
  17. "It seems that some stocks cannot be traded using SCB online trading. From my experience, they are the penny stocks"

    I share the same experiences.

    It is a pity that some penny stocks cannot be traded on SCB online trading platform. Their strength lies in "No minimum commission" which is highly attractive to investors accumulating illiquid, penny stocks. If SCB does not allow penny stocks to be traded, they are not playing to their strengths.

    Besides, SCB should at least provide a list of non-tradable stocks. I hope they come out with such a list soon.

    ReplyDelete
  18. Kopi $ can trade /:)
    Maybe in stocks like popular
    Aimams
    Lippomaple tree
    Or 0.5-1 cent run haha
    Make standard charter lose $

    ReplyDelete
  19. Can someone explain what is meant by the following?

    1. You can only sell your shares using SCB if shares are not deposited into the CDP account.

    You mean we cannot sell our shares using SCB if the shares have been deposited into the CDP account after 3 days?

    ReplyDelete
  20. Hi nice girls,

    It should be DBS cash-upfront, not SCB. SCB shares are held in a nominee account and not deposited into CDP account.

    When you buy shares using DBS cash-upfront, it takes about 3 days for the shares to be deposited into the CDP account. If you want to sell your shares within this 3 days period, you can use DBS cash-upfront account to do so. After 3 days, you cannot use DBS cash-upfront account and have to use other brokers which have higher commission to sell.

    ReplyDelete
  21. Good Stuff

    Im using an OX account for US stocks. I don't touch other foreign stocks. And using POEMS for local stocks. Will probably slowly switch over to SCB for all local trading.

    The 2 issues of concern seem to be a nominee account which SCB/Foreign brokerages use for sinkies & high exchange rates for SCB.

    Im not so worried about the first due to the legal minimum sum insured/covered for nominee accounts. The second issue is dependent on trading habits & convenience. Whether the user is willing to pay the fee for the other benefits.

    Yow

    ReplyDelete
  22. Use the ticker of SGX to find your stocks. All are found in Standard Chartered online trading platform

    ReplyDelete
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  24. Great Information!!!
    I am disappointed that SC cant offer me the promo despite the fact that i have open the online trading account some days ago.
    http://invtraks.blogspot.com/

    ReplyDelete
  25. This is my understanding after paying SC a visit. To enjoy the priority banking rate of 0.18% one can transfer shares in. You can then sell the shares at the 0.18% rate. Transfer in would also entitle you to shopping vouchers. However there is a cost of transferring shares from CDP to the nominess account in SC.

    ReplyDelete
  26. And if i m not wrong the cost of transfer is SGD10.70/1000shares which i think is pretty high.

    ReplyDelete
  27. I want to open my account in standard chartered , it help me
    I want to open my account for my company Global SEO Services

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  28. SCB is the cheapest currently. Hopefully there will be other better/cheaper services to come.

    There is a list of updated Singapore brokers at http://tradersingapore.blogspot.com

    ReplyDelete
  29. I believe SCB is doing synthetic product on shares just like what those bucketshop like IGmarket and CMC are doing. These are not the real shares that you own.
    So if you are comfortable with bucketshop this SCB platform should be alright for you.

    ReplyDelete
  30. Just did some searching online and found this. Doesn't seem like shares being held in a nominee account is a good idea.

    http://www.asiaone.com/Business/News/Story/A1Story20081007-92216.html

    ReplyDelete
  31. Fantastic website you have here...thanks

    Pls visit mine too

    Http://sgtalk.org

    ReplyDelete
  32. I am already a registered member of http://sgtalk.org

    Thanks for the forum.

    ReplyDelete
  33. Hi there,

    I am totally new to share market and i would love to invest in the market.

    Is the low rate fees available in Malaysia SC as well?

    ReplyDelete
  34. Hi,
    thanks for your informative blog. Do you recommend to use SCB online trading account to trade the US stocks? Do you happen to know how is the exchange rate between SGD and USD compared to E-trade or option express?

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  35. Thanks for this I was trying to get information on latest Singapore housing loan interest rates.

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  36. hi, I would like to share my 1 year plus experience using SCB online trading platform. Now I am using another platform.

    Advantages:
    1) low commissions (main benefit)
    2) some news feed/analyst reports

    Disadvantages:
    1) online platform very lumbersome, hard to trade relative to other platforms
    2) hard to get real time quotes in one screen. have to go into each stock and click on ‘refresh’ to get real time quote.
    3) this is the very painful part – very slow in informing about rights issues. and don’t send the full rights prospectus, unlike when your stocks are in CDP. Only send one sms or letter and it’s usually later than the mails I receive from CDP on rights issue.
    4) Does not reflect my warrant value and info on my online account. e.g. for Olam warrants. Said online platfom does not support warrant trading. Said that I have to call trading desk if i want to ask about my values and trade. And I only know my trade results end of the trading day if it is done by trading desk.
    5) Sometimes trade execution is super slow. For eg., I submit a price that is at the current market price (as checked from another trading platform) and with sufficient volume, but the SCB trade just gets acknowledged but not executed for very long.

    ReplyDelete
  37. This week, Standard Chartered has announced a new online trading with a pricing structure which will shake up the brokerage industry in Singapore. structured settlement quotes

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  49. The interest rate of SCB is very low... 0.1% is quite negligible... They should provide a little extra than this...

    ReplyDelete
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