A few days ago, we came to learn that the Standard Chartered online equities platform would no longer be offering the much talked about “No Minimum Commission” from 1 August 2016
Instead, a minimum charge of $10 will apply for all shares being traded on the SGX. The 0.2% brokerage charges would still apply, so you pay whichever is higher.
If you buy shares of $5,000 or more, you would pay 0.2% brokerage charges (i.e. $5,000 X 0.2% = $10).
What This Means For Investors
Small investors, especially students, stand to lose out from the inclusion of the minimum commission fee. Previously, many students (including ourselves) enjoyed investing in shares using the Standard Chartered platform because we did not need to pay any minimum commission for trades being made.
For example, if we wanted to invest $1,000 for a month, we would pay a brokerage charge of $2. Based on the new conditions, we will now need to pay the brokerage firm $10, or 1% of our overall investment.
What This Means For Standard Chartered
Since the main advantage that Standard Chartered had over its competitors in the brokerage industry was its “No Minimum Commission” offer, the question now would be how Standard Chartered intends to position itself going forward.
A look at the Standard Chartered website on 2 June 2016 showed that the company has yet to update its page on the removal of the “No Minimum Commission” offer. In fact, it continues to exist as one of the main attraction for using its brokerage platform.
New user acquisitions for brokerage platform are extremely expensive. Previously, the company could acquire and retain customers through offering a low cost. Will they still be able to do it now?
It is worth noting that DBS Vickers and POEMS have their own promotion currently going on. We suspect some of it is aimed towards attracting Standard Chartered’s existing customers.
CDP Account Vs. Custodian Accounts
Despite the inclusion of the Minimum Commission, Standard Chartered still offers a rate that is better than most other brokerage platforms.
However, it is worth noting that when you purchase a stock using the Standard Chartered platform, the stocks will not be credited into your Central Depositary (CDP) Account. Standard Chartered will hold your stocks as a custodian.
Our local brokers such as DBS Vickers, UOB Kay Hian and OCBC Securities will credit the stocks to your individual CDP account when you buy through them.
We will not go into the details of the differences between holding stocks in your CDP account, and have another entity to hold it as a custodian. But do note, there are differences. If you need to find out more, we suggest doing further reading.
There are a few other finance publishing blogs that have already written at length about how this new changes will affect them. If you are keen to find out more, we recommend reading this article written by Investment Moat and another from Poor Learn Rich.
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