Buying NYSE shares through an online broker

d712

Hello


Will I incur any additional charges if I bought NYSE shares through an online broker like Hargreave Lansdown?


Sorry if that's a daft question.


Thanks

steelbru

http://www.hl.co.uk/help#charges-and-fees/share-charges/shares/how-much-does-it-cost-to-purchase-overseas-shares

bowlhead99

d712 wrote: »

Hello


Will I incur any additional charges if I bought NYSE shares through an online broker like Hargreave Lansdown?


Sorry if that's a daft question.


Thanks

Do you mean an online broker like Hargreaves Lansdown, or, specifically Hargreaves Lansdown ?

HL's charges are here:
[url]Http://www.hl.co.uk/investment-services/fund-and-share-account/charges-and-interest-rates[/url]

As you can see, the fx rates are a bit steep. But some other brokers are almost as bad. If your question is do online brokers who offer international markets charge a premium on top of their usual dealing fee for international trades, the answer is, it depends. Some would charge extra, some would have a different fee structure entirely, some don't offer international markets at all.

d712

Thanks for the response and yes I did mean Hargreaves Lansdown.


So there's charge of 1.7% on trades of less than £10,000?


I'm assuming that charge is on purchasing the shares. There's additional charge on selling them is there?

bowlhead99

It's every time you need to convert from sterling to dollars or euros or vice versa.

HL doesn't allow you to hold USD in the account. So if you want to buy $1500 of shares you give them your £1000 or whatever (which incurs a spread over the mid-market bank exchange rate), and then when you sell the shares to get your $1500 back, they will convert it to £ again incurring a spread the other way, so you won't have as much as £1000 (unless the shares rose in value or the underlying exchange rates moved).

This might be a small annoyance on a single share "round trip", but if what you wanted to do with your $1500 sale proceeds was buy another $1500 of USD shares, it could start to get expensive, to have to pay to keep going back and forth.

If you're going to do a lot of it you would be better finding a broker that lets you hold multi currency cash or has lower exchange fees or both. Although if this is in an ISA account, I don't think the rules allow foreign currency cash to be held.

d712

Thanks


I looked up Wal-Mart (WMT) on my HL account and its price is listed in dollars and it says the stock can be held in an ISA.


I have a couple of questions just so I can tell whether I've understood and for the sake of argument lets say the exchange rate is £1 = $1.50.


I could pay £1000 and instead of having $1500 of shares, I would have $1474.50 worth of shares after 1.7% is deducted.


The funds will be listed in my portfolio as being in pounds not dollars with an initial value of £983 (£1000 - the 1.7%).


If the stock becomes worth £1500 ($2250), I might sell but instead of getting £1500 I get £1474.50 after the 1.7% is deducted again.


Is that roughly correct?


Thanks

steelbru

You've forgotten the standard £11.95 HL trading cost that applies to both purchases and sales of shares. Note this fee can be less if you trade frequently - see bh99's link for volumes required.

This is a set fee, not a %age, so the bigger your purchase/sale, the less the effect it has.

d712

Thanks

Are the assumptions I made in my last post correct?

bowlhead99

d712 wrote: »

Thanks

I looked up Wal-Mart (WMT) on my HL account and its price is listed in dollars and it says the stock can be held in an ISA.

I have a couple of questions just so I can tell whether I've understood and for the sake of argument lets say the exchange rate is £1 = $1.50.

I could pay £1000 and instead of having $1500 of shares, I would have $1474.50 worth of shares after 1.7% is deducted.

Yes, you can look at it that your £1000 will only buy you $1475 dollars to go and buy the shares.

Or if you look at it the other way and say that if you really do need $1500 to buy the exact number of shares you want (say 19 shares at $78.95 each), then it will cost you not £1000 but £1017.

Either way, each pound's worth of investment basically costs you 1.017 of what it would have cost if you had been able to exchange pounds for dollars at the mid-market rate of $1.5:£1 (which in practice, nobody can trade at).

The funds will be listed in my portfolio as being in pounds not dollars with an initial value of £983 (£1000 - the 1.7%).

The investment will be in your portfolio with an initial cost of £1000 or £1017 (depending whether you reduced your investment to only $1475 or went ahead and paid the extra to buy the full $1500)

In your portfolio, the investment will have an initial value of $1475 or $1500 depending how many shares you actually bought; which they will display to you using the theoretical market exchange rate of 1.5 so they will tell you the investment has a sterling value of £983 or £1000 respectively.

However, if you were to try to actually sell the shares you would not receive the £983 or £1000 of cash proceeds, because you can't get the 1.5 rate. From your investment of $1475 or $1500, you would instead get £967 or £983 respectively.

Effectively you have an instant loss of (ignoring roundings) £1000-967 = 3.3% or £1017-983 = 3.3%

If the stock becomes worth £1500 ($2250), I might sell but instead of getting £1500 I get £1474.50 after the 1.7% is deducted again.

Roughly yes... although without thinking about it too much on a lazy bank holiday morning it might be £1474.93 (being $2250 / 1.5 / 1.017) ; the effective exchange rate is not 1.5 but 1.5 x 1.017 =1.5255, so $2250 translates directly to £1474.93, rather than translating it to £1500 and then subtracting a 1.7% "charge" from the result.

But yes you have got the concept about right.

Is that roughly correct?

Yes roughly. Ignoring the usual fixed price dealing fees.

Basically you just need to know that $1500 is going to cost you more than £1000 to buy ; and when you see that someone on the stock market is willing to buy those shares off you for $2250 or $1500, the value in your portfolio might display as £1500 or £1000 for convenience but if you actually sold, you would receive less than £1500 or less than £1000 in your hand, because you can't get access to the pure theoretical exchange rate.

d712

That's great.


Thanks for such a detailed response!