For stock purchases in Singapore, there are 3 main components: SGX, broker and the CDP.
The Singapore Exchange (SGX)
SGX is the stock market for Singapore listed stocks. It manages stocks transaction, as well as updates the prices on latest done transactions. Investors who wishes to purchase stocks off other investors can buy them off the market.
Fees & Information
SGX charges 3 fees:
- Market fee – 0.04%
- Trading fee – 0.0075%
Other than stocks, products such as structured warrants have different fees (0.004% and 0.001% respectively).
Minimum order size of stocks is 100 shares. Orders, to sell or buy, are match according to price and queue number.
For updated info, please visit: SGX trading settlement
- 9am to 5pm continuously (recently there are talks to reinstate a shorter 1 hour lunch break).
There are 2 periods that allows you to pre-queue your order,
- pre-open (8.30am-8.59am) & 1 min non-cancellation (8.59-9.00am)
- pre-close (5.00pm-5.05pm) & 1 min non cancellation (5.05pm – 5.06pm)
This period allows you to enter and queue your orders, although they won’t be matched because the market is closed, and facilitates the transparency of the market (so that you can see if a stock price has risen/ dropped a lot, and cancel your market order before market opens.)
The market is closed on public holidays, and operates for half day on eve of public holidays.
Investors cannot directly access SGX to purchase stock. They must first open an account with a broker, who has a license to conduct trades on SGX and will do so on their behalf. There are 2 main kinds of brokers:
- Traditional – Conducts trades on your behalf, your holdings are held in your CDP accounts.
- Custodian – Conducts trades on your behalf, and hold the stocks under their name for you.
Fees & Information
There are different fees a broker may charge, notably:
- Commission (may differ for online transactions and phone transactions)
- Annual Fee
- Account maintenance fee
- Minimum balance requirment
- Custodian fee
Here are the list of brokers, their commission and minimum commission (online):
- DBS Vickers – 0.28%, $25
- OCBC securities – 0.275%, $25
- UOB Kay Hian – 0.275%, $25
- Maybank Kim Eng – 0.275%, $25*
- Philips capital (POEMS) – 0.28%, $25
- Lim and Tan – 0.28%, $25
- CIMB – 0.275%, $25
- Citibank brokerage – 0.25%, $28
- RHB Securities – 0.275%, $25
- * Standard Chartered – 0.20%, $10
- * SAXO capital markets – 0.12%, $15
Rates are for order size below SGD 50,000. A higher order size may incur a lower commission rate.
Some firms also offer a cash upfront account which only allows transacting with cash in the account. These accounts generally charges a lower commission rate.
An investor can have multiple brokerage account, just think of them as different highways with varying tolls to reach the same destination (SGX).
Key point 1:
Commissions matters. While the rate of 0.28% may not seem like a lot, for investors with less capital, a commission of $25 on $1000 order size would be 2.5%. Doing 1 trade a month (buy and sell) would incur at least $600 in charges a year.
Central Depository (CDP)
The CPD is a subsidiary of SGX to facilitate holding of stocks. Similar to a CPF account, an investor can only have an account in your name with the CDP. Generally, all your stocks, bonds, government securities are stored in this account.
Fees & Information
- Clearing fee – 0.0325%
For depositing your stock into, and taking it out from CDP for sale, there is a fee of 0.00325% levied. Custodian accounts such as SCB and SAXO doesn’t keep your holdings in the CDP.
Brokerage firms that uses the CDP will ask you to sign up for a CDP account if you don’t have one, and link to it if you do. Investors using custodian accounts will have to do it on their own.
If you are purchasing stocks directly from the company (that is listing for the first time), you will be charged $2 for an administrative fee and any shares you manage to get will be deposited directly into your CDP account.
How does it work?
Login to your brokerage account, and enter the stock code, price to buy at, and quantity to purchase the stock.
Submit your order and wait for the confirmation status. Once submitted, your order is queued into SGX to await a match. If someone decides to sell it at the price you offer and there is nobody in front of you at that price, your order will be matched and filled. (Depending the amount you are buying, sometimes you order may only be partially filled.)
If you are using a custodian account, the stock should immediately appear and be available for trading in your account.
For traditional accounts, you should receive a statement within 1 day from trade day, and the stock should be deposited into/withdrawn from your CDP within 3 working days. You will need to make payment on the 3rd day as well.
You can continue to trade the same stock you have bought on the day itself (buy and sell within a day), known as a contra trade. Any profit / loss made and commissions will be deducted from your account.
Which is better, CDP or custodian based brokerage account?
A lot of people worry about the safety of their holdings if it is held in a custodian account. While that is partially true, one must understand that in principle of how nominee account works.
How nominee accounts work
Your shares are legally owned by a non-trading subsidiary of your stock broker, known as a nominee company. While the nominee company is the legal owner of the shares, you are the beneficial owner, meaning that you have rights over them.
This means that
- they trade your holdings according to your instructions
- they pass cash from the sale of your shares or from dividends on to you.
- your assets are legally separate from the assets and liabilities of your stock broker
If the broker goes bust, your stocks are still your property. The creditors can’t touch them. Interested? Read more here.
The 2 situations which might close your accounts are:
- Firm is shifting out of Singapore – which in that case, you will probably be given enough time to transfer holdings out of accounts (Read E*TRADE did when they decided to close their Singapore office)
- Firm is bankrupt – Legally, the company shouldn’t touch your stocks for cash. However in the event of bankruptcy, it becomes a very tempting source of quick cash.
Do take note that the risk of a custodian account is still present, just that we shouldn’t be overly worried that big banks like standard chartered may fall without warning or sufficient time for you to do something about it. SAXO, I’m not too sure.
If you are trading overseas market from Singapore, most brokers hold it in a custodian account for you as well.
Personally, we use SCB as our main investment account due to its low commission rate, at least hitting the minimum commission for each trade we do.
Next in our basics series, we will talk about valuing a stock.