Finding a Broker to trade US and Hong Kong stocks

I came across this article by the Fifth Person: “How to open a brokerage account in Singapore (and how to choose the right broker)” (read here).

In the article, it mentioned the following:

“I’ll assume you plan on trading in the local stock market since you’re to looking to open a brokerage account in Singapore. But besides the SGX, you may also be interested in stocks listed in foreign markets like Malaysia, Indonesia, Thailand, Hong Kong, the U.S., etc. If that is the case, you probably want to check if a broker offers you access to the markets you want.

Do note that foreign shares are not held in your CDP account, instead they’re held in a nominee account with your broker. Most local brokers charge S$2 per month per counter for foreign stocks. This can add up to quite a bit if you invest quite a bit overseas (in which case you may prefer to go direct to a foreign broker to save on fees).

For U.S. markets, I personally prefer to use a U.S. broker as their commissions are much cheaper at around US$5 per trade (Interactive Brokers goes as low as US$1 per trade). A few U.S. brokers like OptionsXpress and thinkorswim have Singapore branches which can come in handy in case you need any support.”

Basically, I do trade US and Hong Kong listed stocks using the local (Singapore) brokers here. And yes, they do charge approx. $2 per counter (UOB KH’s rate is $2 per counter per month while Phillips Securities’ rate is S$2.14 per counter per month).

Hence, I did a quick application and checked online with some of the overseas brokers.

Min. Monthly Activity Fee & Inactivity Fee

Basically, I do understand that Interactive Brokers, have this policy for minimum monthly activity fee requirement (if you do not meet the min. monthly trading quota, fees will be imposed, unless you have more than 100,000 USD in equity in your account).

If you don’t trade for any given month, the fee would be USD 10 (eg.  USD 10 – commissions).

• For Interactive Broker – read here.

In the case of Saxo Capital, no fees are charged for holding an account with Saxo, unless the account has been inactive for a prolonged period of time, in which an inactivity fee applies.

• For Saxo – read here.

For accounts with no trading activity during a period of 6 consecutive months (180 days) an inactivity fee of USD 100.00 or equivalent in the account currency will be charged.

This ‘inactivity fee’ requirement is a big deal to me as a passive investor, as I am basically a buy and hold investor. And for some counters, I do hold them for many years.

Or put it in another way, I do not like to be compelled to trade (due to inactivity fees). If there are no good reasons to buy or sell, then why should I do any trades?

Fees imposed for having stocks in a Nominee Account: Is it such a big deal?

Yes, the fee amount involved may not be big ($2 per counter per month). Especially given that most people don’t hold their stocks for long and they don’t really have that many counters.

For instance, to hold a counter for 10 years, it would probably cost me only $240 ($2 x 12 x 10), provided that the rate did not change in the future. I do doubt that the rates won’t change within 10 years. How much it would change, I have no idea.

From another angle, this amount ($240) would probably be lower than the unrealised values of the stock holding daily fluctuations.

However, being the ‘cheapskate’ that I am, there is this nagging feeling as to why I need to pay for this inactivity fee (no matter how small the amount is).

On further inquiry, I noticed that OptionXpress and TD Ameritrade do not have such inactivity fee requirements.

More on the above-mentioned brokers later.

Minimum Deposit for New Account

Most of the US brokers require a min. funding to open an account. For instance, Interactive Brokers require a min. deposit of USD 10,000 (read here). Similarly, for OptionXpress, they require a min. deposit of USD 10,000 (read here).

I did notice that TD Ameritrade (read here) does not have a min. deposit requirement.

Now, I am quite concerned about the initial wiring of USD 10,000 to an overseas US bank account. USD 10,000 is not a small amount to me. And then there is the fee involved to wire money (which makes the purpose of eliminating holding fees with a local broker kind of pointless).

Non-US Citizen not residing in US opening a US brokerage account (likewise for opening a Hong Kong brokerage account)

Nevertheless, I tried applying for a new account with the following:

1. TD Ameritrade (US brokerage): To trade US Stocks
2. OptionXpress (US brokerage): To trade US Stocks
3. Phillips Securities (Hong Kong brokerage): To trade HK Stocks

For item 1: TD Ameritrade (US brokerage). When I tried applying online, I was directed to the TD Ameritrade (Singapore brokerage) upon partial completion of the application, and after I stated that I am a non-US Citizen not residing in the US.

This got me curious again. Would there be holding fees (eg. the US stocks are held in a nominee account) should I trade via the TD Ameritrade (Singapore brokerage). Upon inquiry with the Singapore branch, I was told that there is no holding fee. See below reply.

“If you live in Singapore, you can only open an account with the Singapore office. We do not charge any custodian fees for holding your stocks. We currently only offer US markets, so you will not be able to trade Hong Kong stocks through us.”

So currently, I am in the process of applying for an account with TD Ameritrade Singapore.

For item 2: OptionXpress (US brokerage). I tried applying online, and enquired via their online chat. I was informed that they have stopped accepting new applicants until the ongoing company integration is completed. I was not informed when this integration will be completed (despite asking).

The below is what I found on their website:

“Do you open accounts for people outside the U.S.? 

Yes, upon our review and at our discretion we accept unsolicited accounts from non-U.S. residents. Although our account opening process is geared toward opening accounts for persons with a U.S. domestic address, we will review and open foreign accounts depending on the country of residence and at our discretion. Please note that we are a U.S.-based broker. We offer only U.S. exchange traded products and we accept only U.S. currency in our customer accounts.”

I think many like OptionXpress due to their low fees. Anyway, for the time being, I wasn’t able to open an account.

For item 3: Phillips Securities (Hong Kong brokerage). I have a Phillips Securities Singapore brokerage account. However, Phillips Securities Singapore and Phillips Securities Hong Kong are two different entities.

I was informed of the below by the Hong Kong branch for opening an account to trade Hong Kong stocks.

“For Overseas Customers, if you cannot open an account in person, you can open an account by post and should enclosed the following documents:
 
(a) Hong Kong Identity Card OR Travel document with photograph (i.e Passport)
(b) Proof of residential address issued within the recent three months; e.g. Recent utilities bills, bank statements
(c) Completed Account Opening Form and W.8 Ben
(d) For non face-to-face client, the additional document is:
 (i) *a cheque of HKD10,000 issued by authorized bank in Hong Kong; (A crossed Personal cheque of HK$ 10,000. Please make the cheque payable to “PHILLIP SECURITIES (HK) LTD”.) which can be drawn on a Local Bank.  Deposit can be used for stock trading and is refundable when close account.
     OR
(ii) **document issued by governmental body
 
*The cheque or document bearing client’s full name and signature must be the same on the Account Opening Form.
** All of the above mentioned (a,b,c,d sections) should be of Certified True Copy (The documents should be verified by suitable certifier, such as our Company’s employee, licensed representative, authorized insurance agent, bank manager, CPA, lawyer etc. The certifier should sign and date the copy documents with his position / capacity, contact detail, and state it is the true copy of the original.) and mail to 11-12/F United Centre, 95 Queensway, Hong Kong .”

Currently, I am still trying to understand through them what they meant by item (d)(ii). I wonder if a certified true copy of passport would work (which is basically a repeat of item (a)).