26 June 2017
Which FX and CFD Brokerage Firm Should You Use?
We’ll make that choice simple by focusing on just three main factors:
Fees and charges
Diversity of products offered
Additional features and resources
1. Fees and charges
The first point of consideration is arguably what Singaporeans look at the most, and that is the cost of trading. Even the best investment with the most attractive returns may turn out to be a mistake if the cost of making that investment ends up eating into your profits.
The key here, to no one’s surprise, is to look out for brokers with the lowest fees and charges. Because these charges are quite different for each investment product, we’ll be comparing them separately.
Forex minimum spread
PhillipCapital CMC Oanda Saxo
EUR/USD 0.6 1.1 0.7 1.0 0.8
AUD/USD 0.6 1 0.7 1.0 0.8
USD/JPY 0.7 1 0.7 1.0 0.8
GBP/USD 0.9 1 0.9 2.5 0.8
EUR/JPY 1.5 1 1.5 1.4 1.4
Forex transactions work on the basis of spreads. It works similar to a commission, in that the broker earns a percentage of your transaction amount. You’ll want the spread to be as low as possible, of course.
However, because of the more volatile nature of Forex, what most brokers can only assure you of is the minimum spread they’ll charge. Still, knowing the minimum spread is a pretty good indicator of how much more you might end up paying.
Indices spread
PhillipCapital CMC Oanda Saxo
Germany 30 1 N/A 1 1 1.5
US 30 Wall Street 1.8 4 1.4 2 2.5
Hong Kong HS50 6 8 5 5 12
S&P 500 0.4 0.5 5 0.5 0.5
China A50 12 10 20 N/A 12
FTSE 100 2 N/A 1 1 1
Similar to Forex, when investing in stock index CFD, brokers also charge a spread.
Share CFD fees and charges
PhillipCapital CMC Oanda Saxo
SG shares commission 0.10% (min. S$15) from 0.128% (min. S$25) CMC 0.10% (min. S$10) N/A 0.12% (min. S$15)
US shares commission 2 cents/share (min. US$15) from 0.18% (min. US$15) 2 cents/share (min. US$10) N/A 1 cent/share (min. US$9.90)
When it comes to buying and selling shares, commission prices are a fixed percentage of the total price. Do note that for leveraged trading, all brokers also have a funding cost to keep the position open overnight. This cost is usually pegged to interbank rates and can become quite substantial if you decide to hold a position over a longer timeframe.
2. Diversity of products offered
When you’re starting out on your investment journey, you may only want to focus on one product that you’re more familiar with. But as you build your confidence and your portfolio, you may find yourself wanting to expand your horizons and diversify the kind of products you’re investing in.
Here’s a quick overview of what products types are being offered, as well as the number of choices in each product type each broker offers. We’ve narrowed it down to 5 brokers and the more popular investment product types available today.
IG PhillipCapital CMC Oanda Saxo
Forex 90 35 338* 40 182
Shares CFD Over 10,000 Over 2,700 Over 9,000 N/A Over 8,800
Indices 30 14 87 14 29
Commodities 20 2 111 8 19
Binaries Yes N/A Yes N/A N/A
*For CMC, 338 includes both cash and forward pairs.
As you can see, most brokers on our list are already offering investment products we’re looking at, with the exception of binaries. Binaries, as mentioned in a previous article, are a simple product that allows you the benefit of being aware of your risk, while still being able to profit from short-term market movements.
3. Additional features and other resources
While cost is definitely an important factor when choosing a broker, it’s always good to see what other features and resources each broker offers. You definitely want a broker that has a convenient platform that loads quickly both on mobile and desktop, and is preferably customisable to your needs.
Certain additional technological features like risk management tools, in the form of guaranteed stops or alert tools, can also set a broker apart. For more advanced traders, access to algorithmic trading systems to automate the trading process could also be something to look out for in a platform.
Fees and charges
Diversity of products offered
Additional features and resources
1. Fees and charges
The first point of consideration is arguably what Singaporeans look at the most, and that is the cost of trading. Even the best investment with the most attractive returns may turn out to be a mistake if the cost of making that investment ends up eating into your profits.
The key here, to no one’s surprise, is to look out for brokers with the lowest fees and charges. Because these charges are quite different for each investment product, we’ll be comparing them separately.
Forex minimum spread
PhillipCapital CMC Oanda Saxo
EUR/USD 0.6 1.1 0.7 1.0 0.8
AUD/USD 0.6 1 0.7 1.0 0.8
USD/JPY 0.7 1 0.7 1.0 0.8
GBP/USD 0.9 1 0.9 2.5 0.8
EUR/JPY 1.5 1 1.5 1.4 1.4
Forex transactions work on the basis of spreads. It works similar to a commission, in that the broker earns a percentage of your transaction amount. You’ll want the spread to be as low as possible, of course.
However, because of the more volatile nature of Forex, what most brokers can only assure you of is the minimum spread they’ll charge. Still, knowing the minimum spread is a pretty good indicator of how much more you might end up paying.
Indices spread
PhillipCapital CMC Oanda Saxo
Germany 30 1 N/A 1 1 1.5
US 30 Wall Street 1.8 4 1.4 2 2.5
Hong Kong HS50 6 8 5 5 12
S&P 500 0.4 0.5 5 0.5 0.5
China A50 12 10 20 N/A 12
FTSE 100 2 N/A 1 1 1
Similar to Forex, when investing in stock index CFD, brokers also charge a spread.
Share CFD fees and charges
PhillipCapital CMC Oanda Saxo
SG shares commission 0.10% (min. S$15) from 0.128% (min. S$25) CMC 0.10% (min. S$10) N/A 0.12% (min. S$15)
US shares commission 2 cents/share (min. US$15) from 0.18% (min. US$15) 2 cents/share (min. US$10) N/A 1 cent/share (min. US$9.90)
When it comes to buying and selling shares, commission prices are a fixed percentage of the total price. Do note that for leveraged trading, all brokers also have a funding cost to keep the position open overnight. This cost is usually pegged to interbank rates and can become quite substantial if you decide to hold a position over a longer timeframe.
2. Diversity of products offered
When you’re starting out on your investment journey, you may only want to focus on one product that you’re more familiar with. But as you build your confidence and your portfolio, you may find yourself wanting to expand your horizons and diversify the kind of products you’re investing in.
Here’s a quick overview of what products types are being offered, as well as the number of choices in each product type each broker offers. We’ve narrowed it down to 5 brokers and the more popular investment product types available today.
IG PhillipCapital CMC Oanda Saxo
Forex 90 35 338* 40 182
Shares CFD Over 10,000 Over 2,700 Over 9,000 N/A Over 8,800
Indices 30 14 87 14 29
Commodities 20 2 111 8 19
Binaries Yes N/A Yes N/A N/A
*For CMC, 338 includes both cash and forward pairs.
As you can see, most brokers on our list are already offering investment products we’re looking at, with the exception of binaries. Binaries, as mentioned in a previous article, are a simple product that allows you the benefit of being aware of your risk, while still being able to profit from short-term market movements.
3. Additional features and other resources
While cost is definitely an important factor when choosing a broker, it’s always good to see what other features and resources each broker offers. You definitely want a broker that has a convenient platform that loads quickly both on mobile and desktop, and is preferably customisable to your needs.
Certain additional technological features like risk management tools, in the form of guaranteed stops or alert tools, can also set a broker apart. For more advanced traders, access to algorithmic trading systems to automate the trading process could also be something to look out for in a platform.
Labels: brokerage, Forex Brokers
