Important Notice – Standard Chartered Online Equities Trading will impose a minimum brokerage amount of S$10/US$10 with effect from 1st August 2016. This post was first written in January 2014.
Alright, here it goes. This is my attempt to write somewhat of a guide on how you can start index investing with Standard Chartered via their Online Equities Trading Account. I’ll give more information along the way as to why it has to be Standard Chartered, and not other platforms or brokerages. Also, you’ll find out why you can’t apply for an account with Standard Chartered if you’re just starting out. Read on!
Straits Times Index Exchange Traded Funds
Before we get started, let’s get familiar with what exactly we are going to be investing in, shall we? For the Singapore market, realistically we only have two choices.
1) SPDR Straits Times Index ETF (ES3)
The SPDR® Straits Times Index ETF (“STI ETF”), Singapore’s first locally created exchange traded fund which was formerly named streetTRACKS STI ETF, seeks to generate returns that closely correspond to the performance of the Straits Times Index (“Index”). The Fund is listed and traded like any share on Singapore Exchange Securities Trading Limited.
2) Nikko AM Singapore STI ETF (G3B)
The investment objective of the Fund is to replicate as closely as possible, before expenses, the performance of the FTSE Straits Times Index, or upon the Manager giving three (3) months’ prior written notice to the Trustee and the Holders, such other index which tracks the performance of Singapore listed equity securities.
Apart from being run by different fund managers, the key difference here is that SPDR Straits Times Index ETF can only be purchased in lots of 1,000 shares, whereas the Nikko AM Singapore STI ETF can be purchased in lots of 100 shares. Also, notice that they have worded it very carefully that they only replicate the returns of STI ETF as closely as possible, and not exactly.
Why Standard Chartered Bank?
DBS Vickers. CIMB. POEMS. Etc. Why must it be Standard Chartered?
No Minimum Commission!
To take the exact words from the official website, Standard Chartered is the only bank in town to carry no minimum commissions on share transactions. When other people are blindly paying S$25 per trade, here you are only paying 0.2% for the SGX, and 0.25% for other markets.
This means that you can trade regularly (e.g. once a month), and you can make only a small purchase each time (e.g. 100 shares of Nikko AM Singapore STI ETF). This is extremely importantly for high frequency trades of low value, especially if you’re trying to mimic a regular savings plans (such as POSB Invest Saver or OCBC Blue Chip Investment Plan) at a lower cost and with greater flexibility.
Imagine that the STI ETF is priced at $3.00 and you purchase 100 shares.
- Standard Chartered Commission Fees = $3.00 * 100 shares * 0.2% = 60 cents
- Brokerage XXX Charging $25 minimum = $25 (equivalent to 8.33%)
Of course I’d prefer to pay 60 cents compared to $25. What about you?
Why Are The Fees So Low?
Shares purchased using Standard Chartered Online Equities Trading Account are held in a custodian account under Standard Chartered Bank. The shares will NOT be deposited into your CDP account.
Standard Chartered Online Equities Trading Account
Applying for a Standard Chartered Online Equities Trading Account is easy. For some of you, that is.
For existing customers, you can sign up online. For new customers, you would have to drop by one of the branches to submit your application form.
Wait a minute – I have potential bad news for you, if you have executed less than six trades in your entire investment lifetime.
Huh? What’s The Problem?
Upon taking a look at the application form, you will see a section titled “Customer Assessment Review (CAR)” that you’ll have to fulfill.
In particular, this –
I possess investment experience in listed specified investment products (SIP) and I have transacted at least six (6) times in listed SIPs in the last three (3) years.
If you do not possess relevant work experience or education qualification in the finance industry, you will be screwed by this criteria if you’re just starting out.
If you think about it, it is kind of ridiculous, isn’t it? If I don’t even have a trading account, how am I going to clock the six trades to make me eligible for opening my first trading account with Standard Chartered? I posed this question to the branch staff previously, who simply gave me a sincere smile and said there is nothing they can do about it.
What does this mean? Oh! Only when I have registered six trades with other brokerages, then I can open a trading account with Standard Chartered. What the heck? Isn’t six trades going to cost me at least SGD 150 in commission fees with other brokerages?
What Is This Customer Assessment Review?
Basically, it means that investors have to know what they’re doing before they are allowed to dabble in trading etc. This is a requirement by the The Monetary Authority of Singapore (MAS), which requires intermediaries to formally assess a retail customer’s investment knowledge to understand the risks and features of Specified Investment Products (SIPs).
For other brokerages, if you don’t fulfill the basic three criteria, you would have to pass a knowledge quiz offered by the SGX (not exactly easy, you’ll have to put in some time) before you are allowed to trade. That was how I created my accounts with CitiBank and DBS, even though I have never used them before.
Interestingly, if you follow the quiz link and view the choices listed in the dropdown boxes for primary and secondary broker firm, you will not see a choice for Standard Chartered Bank.
A quick call to Standard Chartered Bank didn’t yield any useful information. I asked if we could send in our SGX knowledge quiz results, the guy said no. He simply said that we could still send in the application form, which would be subjected to approval by the bank.
How Did I Create My Trading Account Back Then?
Three words – I was lucky.
I had already created my trading account with Standard Chartered before the Customer Assessment Review requirement kicked in.
When I was notified by the bank of this requirement, I had already clocked four trades. Also, the Customer Assessment Review had a grace period by which we had to fulfill the requirement.
So, what I did was to clock another two trades before the Customer Assessment Review deadline using my own Standard Chartered trading account before submitting my application form again for re-assessment. Sounds stupid, right? In theory, I can simply buy and sell as many times as I want in a single day and I would have fulfilled the requirement. Remember that this is Standard Chartered Bank with no minimum commission, so my net cost was only a few dollars in fees.
I’m Newbie. What Should I Do?
Start by doing the SGX knowledge quiz, either way you’re going to need to do this.
Send in your application form to Standard Chartered and see what they say. Remember, the experience I went through was quite long ago so the rules/regulations/protocol might have changed. No harm trying your luck, eh?
This article is simply a collection of information freely available on the internet, as well as inputs from my personal experience – please take note that things may have changed along the way. Standard Chartered is not necessarily the best platform from which to execute your trades. It is simply one that fits my needs in the best way possible.
Happy investing! If you have any comments to add from your experience, feel free to share them with me here.
Update : 27th August 2015
Starting 28th August 2015, Standard Chartered Bank is going to charge a new fall-below fee of S$5 monthly for e$aver Account if the minimum average daily balance is below S$1,000.
Update : 5th June 2016
Important Notice – Standard Chartered Online Equities Trading will impose a minimum brokerage amount of S$10/US$10 with effect from 1st August 2016. Sadly, they have decided to take this route which means there is no longer a viable, low-cost option for “small portfolio” index investors in Singapore.
Learn More About Index Investing
Still not enough for you? A handful of bloggers have banded together to come up with an eBook, and we talk about how we would invest our first $20,000. Check it out – it is absolutely free!