Last week, I received the following request from Beijing:
A question: you mention technologies that enable regular investors to invest globally. Are you aware of a brokerage that offers investors with $30-50K accounts, say, US, Canada, Japan, HK, Singapore, and Thailand stocks at internet broker prices? A discussion of inexpensive ways to directly invest globally would be great. Thanks! /RoyC
I wrote back to say that Interactive Brokers and HSBC both do a pretty good job. Today, I’ll elaborate for public consumption.
Interactive Brokers (IB) has a large global reach when it comes to index futures and options trading in about 40 markets plus equities trading in about seven of them (U.S., Canada, U.K., Germany, Switzerland, France, and Netherlands).
Customers are generally very happy with IB according to 111 reviews at EliteTrader.com, of which 94 (85%) are positive.
Most IB customers are futures or equity index traders, so I think this self-clearing firm has an easier job of keeping its clientele relatively happy. Once individual (retail) traders start looking out into foreign markets for domestically traded equity issues, the back-office clearing involved becomes more of an issue, however, and IB may not be able to meet your needs.
In fact, to directly answer the query that I received and noted at the top, I believe that IB does no trading of straight equities in the Asia Pacific markets. That may change.
There is however an alternative, which is one that a close friend of mine set up for HSBC. It’s the Merrill Lynch HSBC Direct Trading system offered by HSBC Canada.
I believe if you have a personal relationship with any HSBC office in the world, you could use the electronic and phone trading facilities of HSBC Canada. This is a good system and one I would recommend to retail investors.
The HSBC Canada website shows that this is part of one of the world’s largest financial services organisations, with assets of about $1 trillion. The Direct Trading subsidiary has a website that lists the various countries in the Asia Pacific region where it conducts trades electronically and via phone on behalf of retail customers.
The costs at HSBC are quite fair for global trading. Their service level does not suffer because of the low cost. If you have the least interest, I think you ought to check it out. After all, even calling Beijing or Shanghai from Canada now costs me just C$0.05 cents per minute, which is less than 4 cents per minute in real (U.S.) dollars.
Also, calling Moscow (per minute) is just 7 cents, Sao Paulo 9 cents and Bahamas 11 cents, in U.S. dollars. I suppose if I were to use VoIP, the marginal cost is nil or close to it.
There is really no cost or technological reason why you can’t trade in global securities from just about anywhere today.
Now, because of securities laws affecting retail accounts in certain countries, you do have to check with the trading officers (not just the websites) of these companies, like IB and HSBC, to see if you are permitted to set up accounts.
Sometimes, websites can be misleading. As an example, the OptionXpress.com website recently advertised it was open for business with Canadian customers. Since I knew they had no license to trade in securities in Canada, and may not have been aware of the large fines suffered by Ameritrade and others that made a similar mistake before gaining registration, I called them. They admitted they had no license to trade securities within Canada, but were close to gaining registration, which would make it legal.
So, like a lot of things in life, you have to check, carefully and personally. If you screw up, you can’t blame a website. Securities regulators turn a blind eye to that argument.
There is another possible option that looks very good to me. It’s called ADVFN, and it’s a leading electronic broker in the U.K. I don’t know much about them, but their web site for retail investors is perhaps the best I have ever seen.
I’ll probably write more about that one in the future.
The world is of course becoming a smaller place. Pretty soon, I think, buying and selling securities globally from any number of platforms available to the retail investor will be a common reality.
Of course, if you do so through offshore IBC’s and trusts, it is a reality today, but not many retail investors have set up these complex and costly legal structures.
On the other hand, the lower costs and greater availability of global electronic trading and clearing platforms available between correspondent financial institutions in a growing network of countries, is bringing these services down locally to the retail level. As these types of services proliferate, competition will serve to further push down costs.
Soon there will be no need to go offshore to directly trade in foreign securities in those markets, which is a standard that all securities regulators and taxing authorities would like to see exist.
If any of you know of other global trading brokers available to retail accounts, please let me know so I can write about the. I know there are independent investors who are interested.
By Bill Cara
Photo credit: Ken Lund via Visualhunt.com / CC BY-SA
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