Trading USA shares with XO.co.uk

stphnstevey

I was looking into this and had a great conversation with one of the supervisors at the XO trading desk

I wanted to consolidate what he told me, if it helps others, but also ask if anyone else has experience with this or can comment on any aspects

XO dont apparently allow you to buy foreign listed shares. They will allow you to buy CDI (Crest Depository Interest). I will need to look these up and any information anyone can give is appreciated. It was explained to me as traded in sterling but mirrors the same value as the USA share

To do this first you have to identify which CDI you want to purchase, typing the company name into the trading screen brings up multiple variants, but I was told it is the one that is listed as "company name".US. So for Facebook = FB.US and Amazon AMZN.US

You then list the amount or Quantity as normal. If amount, this is the amount to use including fees.

But you have to list a Limit Price. This is the maximum price you wish to trade at

Then after 2.30pm when the US stock market comes online, the trade goes through. So not live pricing.

Feeswise
- Normal XO dealing charge £5.95
- FX day rate (today was 1.2874) (I was confused if CDI traded in sterling, why the FX rate?)
- Market side charge - charged by the market maker - $20 min upto $20,000 trade, then 0.01% above

Need W-8BEN form - can download from website and email signed scan to clientdata@jarvisim.co.uk

Asked about SIPP reclaiming further 15% withholding tax and they said that was up to the SIPP administrator (Gaudi for me). When I spoke with Gaudi, they said they had been asked about this previously and they confirmed they do not make any further claim for withholding tax

EdGasketTheSecond

Seems too much expense and bother. Just buy a US ETF fund instead traded on the LSE, paid for in sterling and no witholding tax if in an ISA or SIPP; job done.

stphnstevey

EdGasketTheSecond wrote: »

Seems too much expense and bother. Just buy a US ETF fund instead traded on the LSE, paid for in sterling and no witholding tax if in an ISA or SIPP; job done.

Yes, the FX cost can make buying US stocks expensive. But I am currently looking into ways that can be cheaper (or virtually nil)

Then there is not a huge bother, just choosing the right platform, then process is similar to buying any other stock

The reason is potential increased return

Eg Amazon vs (insert US ETF on LSE of your choosing)

Here I was looking at SIPPs (rather than Trading Accounts) due to the tax benefits and potential increased withholding tax reclaim

Thrugelmir

stphnstevey wrote: »

XO dont apparently allow you to buy foreign listed shares. They will allow you to buy CDI (Crest Depository Interest).

Nothing to do with X-O. Under UK law, international shares cannot be handled directly in CREST. CDI's were created to effect the trading of shares on foreign exchanges. A CDI does not mean that a stock has a London listing. Hence why trades are undertaken once the NYSE opens.

In reverse. Many UK companies are traded on the US exchanges in ADR form.

stphnstevey

Thrugelmir wrote: »

Nothing to do with X-O. Under UK law, international shares cannot be handled directly in CREST. CDI's were created to effect the trading of shares on foreign exchanges. A CDI does not mean that a stock has a London listing. Hence why trades are undertaken once the NYSE opens.

In reverse. Many UK companies are traded on the US exchanges in ADR form.

Thanks. Does that mean you always buy the CDI version of a US share on any platform open to UK investors?

Thrugelmir

stphnstevey wrote: »

Thanks. Does that mean you always buy the CDI version of a US share on any platform open to UK investors?

Yes. The shares are effectively held in trust for you. Hence the requirement to complete the US W-8 BEN form.

Cheapest option to purchase would be through a US brokerage with a London operation.

londoninvestor

EdGasketTheSecond wrote: »

Seems too much expense and bother. Just buy a US ETF fund instead traded on the LSE, paid for in sterling and no witholding tax if in an ISA or SIPP; job done.

The problem with US ETFs for the last couple of years has been that nearly all haven't produced the paperwork to be MIFID II-compliant, so they aren't available to US investors.

If you can buy them (or you have them from pre-MIFID II), your SIPP provider (if they're set up properly) can reclaim the withholding tax, but you're still to it in an ISA.
https://monevator.com/etfs-and-the-peculiar-effects-of-withholding-tax/

stphnstevey

Thrugelmir wrote: »

Yes. The shares are effectively held in trust for you. Hence the requirement to complete the US W-8 BEN form.

Cheapest option to purchase would be through a US brokerage with a London operation.

Yes, currently looking into Charles Swab or Fineco

Charles Swab has minimum investment limit in dollars. To use Revolution free conversion at £5000 per month would take 5 months or so to build up

Fineco has European protection but Italy doesn't seem very stable and claiming from UK could be troublesome, particularly if we leave Europe

Interactive Investor has a dollar account, which I thought about sending dollars too via Revolut. It was not clear if there would still be some FX fees. There was a 35 dollar withdrawal fee for dollars. Also a fixed quarterly charge which I might not make use of as trading credits

short_butt_sweet

stphnstevey wrote: »

The reason is potential increased return

Eg Amazon vs (insert US ETF on LSE of your choosing)

when you pick individual shares, there are potentially increased returns. there are also potentially decreased returns.

it's easy to pick winners with hindsight. why do you think you have the ability to pick future winners?

EdGasketTheSecond

Charles Schwab would be a good choice imho but you will be clobbered for 30% US withholding tax on dividends. I understand for a UK resident this can be reduced to 15% with the appropriate paperwork and effort!

masonic

The dividend yield of the S&P500 was 1.99% as of January 2019. We're talking about going to some serious trouble to save what amounts to 0.3% per year (15% of 2%) on an S&P500 ETF held in a SIPP. That 0.3% saving (£30 per year on a £10,000 investment) could easily be more than eroded by extra charges associated with holding non-UK listed securities.