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In what is perhaps the most significant move recently in the Singapore stock brokerage industry, Standard Chartered Bank (SCB) has introduced its online trading service and set a new benchmark in trading fees. What's the catch?

Among the local banks, OCBC and DBS have long embedded their online trading portal within their internet banking platform. Up to now, DBS offers the lowest commission of 0.18% for "cash upfront" buy trades via internet banking.

SCB is at least 1 year late in introducing an integrated banking and trading platform, but looks to have side-stepped the competition with a set of attractive brokerage fees.

Trading Fees

For instance, SCB's brokerage fees for trading in the Singapore market is just 0.2% of the contract value for regular (non-priority) customers, with no minimum charge. This is about 27% lower than the current industry benchmark of 0.275% (which is also typically subject to a minimum charge of $25).

For the US market, the commission is not as compelling at 0.25% (about 17% lower than the usual 0.3%), but SCB does not appear to charge a custodial fee (which is often $2 per month per counter at brokerages such as Philip and OCBC).

Accessible Markets

While not as comprehensive as other brokerages, SCB does offer access to 14 exchanges in 10 of the largest markets globally (Malaysia's KLSE is the notable exception). Besides stocks, securities quoted on these stock exchanges (e.g. ETFs) are also available to be traded via SCB's platform. The full list of markets and brokerage commissions are as follows.

Source: SCB

Features

SCB's platform supports stop-loss orders, but its feature set is otherwise similar to other internet trading platforms in Singapore.

A key difference is that short-selling is not allowed by SCB. More importantly, SCB does not appear to support "contra" trading (i.e. trade-first pay-later) that is popular in Singapore. It is thus similar to the "cash upfront" system offered by DBS, in which a trader has to deposit funds with SCB in order to establish a "Purchasing Power".

As explained by SCB, "available Purchasing Power is the available funds you can use to purchase securities...taking into account available cash balance in your settlement account and considering any monies pending settlement.."

Conclusion

With SGX's move to reduce the bid-size for penny stocks from 4 Jul 2011, SCB's new platform appears to be well-timed to take advantage of the expected increased in participation by retail investors. However, the reduced brokerage fee is apparently not applicable to "contra" trades, thus limiting its appeal.

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