Direct Broking versus eTrade – Fees

Fees for trading in NZ stocks seem to be still based on ancient premises – percentage takes and high rates. Here are ASB’s fees – they charge you the same $30 for a $500 or $10,000 transaction.

asb

Ditto with Direct Broking, who have a slightly lower ticket clipping rate, but still set the baseline at $30 per trade, and thus will charge you the same for a $500 trade and a $15,000 trade.

directbroking

In the USA it is all flat rate, and a much lower rate at that. Most normal investors would pay the $10 fee, which is almost a third as cheap as the NZ and Australian fees. A $30,000 trade in the US would cost $10, versus $90 on ASB and $60 on Direct Broking.

I daresay the execution on eTrade would be an order of magnitude better as well.

Even options are cheap to buy on eTrade:

etrade

eTrade.com manage to avoid those rising commissions for their global fees:

etrade

eTrade Australia also charges high fees and clips the ticket on larger transactions. They reward heavy traders with lower fees, but these pale in comparison with eTrade USA’s $10 trades.

etrade au

So either the market for retail broking is not efficient in Australia and NZ (another cosy NZ duopoly?), or the transactions are inefficiently managed resulting in higher costs, or the exchanges are charging higher fees….

…or all of the above, which is my uninformed pick.

About Lance Wiggs

@lancewiggs
This entry was posted in Business, Internet Business, Investing, NZ Business. Bookmark the permalink.

4 Responses to Direct Broking versus eTrade – Fees

  1. Wasp914 says:

    I think there is one valid point you are missing in your assumptions, which I agree are “uninformed”

    Population…

    Scale is everything when you have a fixed cost on your back office (i.e. as the number of contract notes increase the cost per contract that the back office represents decreases).

    The reason why you have consildation in Australia and duopoly in NZ is neither country has the population to support scale – compare the populations to the US.

    Nothing more, and nothing less…

  2. Lance Wiggs says:

    thanks for the comment
    I left unsaid the obvious scale differences, but that is no excuse in my mind.
    I’d scale using market cap or transaction volume. With $25 Trillion in market capitalision the NYSE is 325 times the size of the NZX’s $77 billion. That’s comparing USD/NZD, before adding the Nasdaq into the mix.

  3. Lance Wiggs says:

    I just got a reply, to a query I made, from Direct Broking saying that they do not offer short selling.

  4. John says:

    About 5 years ago I used to trade in Australia through OptionsXpress. I am using them for trading options and stock in the U.S.A. market but they are not involved in the Aussie market anymore. I am now considering to go back to the Australian market and find that I need to trade quite large $ amounts as smaller positions are killed by brokerage. Are there brokers in the U.S.A. who I can use for the Australian equities?

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