FinancePersonal Finance
Comprehensive Guide: Opening A CDP Account And Brokerage/Stock Trading Account In Singapore
September 3, 2020
Specialists foresee a serious economic crisis because the COVID-19 pandemic imposed lockdown measures in most countries. As such, the labour market is becoming severely impaired, causing stock prices to fall.
The impact on people’s lives will become obvious in the following month, and nobody is safe. If you want to reduce the negative effects on your household, research some wise investments. This article is a comprehensive guide on how stock trading in Singapore. It will help you learn all about brokerage accounts and will put you on the path to successful trading. Read on!
What Are Brokerage Accounts?
Ever heard of stocks, ETFs or bonds?
If you want to start trading on the free market, you have to open your brokerage account. This account can be used for buying and selling ETFs, REITs, bonds, and stocks.
Basically, you need a brokerage account to centralize all the transactions related to your stocks, bonds, and shares.
What Are CDP Accounts?
You also need a CDP account to start trading. This Central Depository account is a safe haven for all your deposits. This “haven” is safeguarded by the Singapore Stock Exchange (SGX), an institution that ensures your shares are available and easy to use whenever you decide to make new transactions.
If you’re a beginner to the stock market, opening a CDP account is the safest way to approach trading. The other option is opening a custodian account. Custodian accounts may be more affordable, but they pose various risks. We’ll delve into those later. Now, let’s see how you can open a CDP account.
How Do I Open A Brokerage And CDP Account?
Opening a brokerage/ CDP account in Singapore is a straightforward, bureaucracy-free process. All you need is to have an account at a local bank, gather your supporting documents, and fill in an application. Otherwise, you can keep things even simpler by applying through a brokerage firm.
Here we go:
1. Open A Bank Account
Is there anyone in Singapore without a bank account? That’s highly unlikely. You can start a CDP account if you are banking with:
- Citibank
- DBS/POSB
- HSBC
- Maybank
- OCBC
- Standard Chartered Bank
- UOB
You should also remember that:
- Your age matters. You need to be 18-years-old+ to open a CDP account.
- Your bankruptcy status matter. If you have an undischarged bankruptcy status, you can’t apply. So, if you’ve applied for bankruptcy and you still have to make debt payments following a court decision, you can’t open a CDP account.
2. Get Your Paperwork In A Row
Ah, paperwork. The favourite thing of people trying to do business all over the world. NOT!
Luckily, applying for a CDP account only requires a few supporting documents that double-check your identity and bank info. Make sure you write everything down correctly to avoid future confusions.
You need:
- Your ID card. Luckily, you can select the ID with the best photo from this list here:
- NRIC
- Singapore Armed Forced Identity Card
- Singapore Police Force Identity Card
- Passport
- Financial statement. You have three options here too. Besides, you don’t need a printed financial statement; the online form is just as good:
- Bank statement. Double-check that your bank is licensed by the Monetary Authority of Singapore (MAS)
- CPF (Central Provident Fund)
- Latest Notice of Assessment for Income Tax
- A bank account. Look at step one to make sure you have an account at the right bank.
- An online copy of your signature. If you’re applying online, you can scan or photograph your signature.
- TIN (Tax Identification Number). Skip this step if you’re not working and paying your dues overseas. But, if you are, know that TIN represents your tax residency status in the country where you’re employed.
Pro tip: Getting these documents is fairly easy and it shouldn’t take you much time. But, if you want to cut some more corners, apply for your CDP through a brokerage company. All you’ll need is to give them your identity card.
3. Apply Online
With all these documents gathered, you can easily fill in your online CDP form online. Courtesy of SGX who recently digitalised the application, you are now free to open your CDP account in less than 15 minutes from your home, workplace, or even the MRT.
The online application is seamless. You can click here to get things moving.
4. Apply via Mail
Well, if for some reason you prefer the old-fashion way, SGX has services for that as well. SGX also allows you to do things the old-fashioned way by using the Singapore mail. Yes, it still exists for letters and stuff. All you have to do is fill in the submission form and put it in an envelope with all your docs.
Mail your goodies to Central Depository at this address:
The Central Depository (Pte) Limited
11 North Buona Vista Drive
#06-07
The Metropolis Tower 2
Singapore 138589
Pro tip 1: If you still have questions relating to your age, financial status, or irregularities in your supporting documents, visit the friendly SGX people. You can find them at 2 Shenton Way, #02-02, between 8:30 am and 5:00 pm during the weekdays. SGX is also open on Saturdays between 8 am and 12 pm, but they’re closed on Sundays and Public Holidays.
Pro tip 2: Stay safe by avoiding crowds. The lunch breaks and Saturdays are packed with people, so it’s best to schedule your visit accordingly.
5. Apply Through A Brokerage Firm
If you’re a beginner, it’s wise to choose a reliable brokerage firm. The people there will help you understand the transaction process and they’ll take care of all the formalities.
However, you should choose a reliable brokerage company. Here are some trustworthy agencies:
- CIMB Securities
- DBS Vickers Securities
- iFAST Singapore
- KGI Securities
- Lim & Tan Securities
- Maybank Kim Eng
- OCBC Securities
- Phillip Capital
- RHB Securities Singapore
- UOB Kay Hian
Tips Before Choosing A Brokerage/ Stock Trading Account
Don’t stop reading now. The ten brokerage firms above are good choices, but you must take your needs, budget, and trading style into account before settling on one.
Let’s start with:
1. The Money
Brokerage firms don’t help you out of the goodness of their hearts. They earn a commission every time you buy or sell stocks.
Look at the tables below to see how trading fees vary and to learn more about minimum fees:
Online Fees Comparison
| Brokerages Firm | Minimum Fees (SGD) | Trading Fees (based on contract amount) (SGD) | ||
|---|---|---|---|---|
| Up to $50,000 | $50K to $100K | $100K | ||
| Stock Holding: CDP | ||||
| KGI Securities (formerly AmFraser) | $25 | 0.275% | 0.22% | 0.18% |
| CGS-CIMB Securities | $25 | 0.275% | 0.22% | 0.18% |
| DBS Vickers | $25 | 0.28% | 0.22% | 0.18% |
| Maybank Kim Eng | $25 | 0.275% | 0.22% | 0.18% |
| Lim & Tan Securities | $25 | 0.28% | 0.22% | 0.18% |
| Phillips Securities (Poems) | $25 | 0.28% | 0.22% | 0.18% |
| OCBC Securities | $25 | 0.275% | 0.22% | 0.18% |
| UOB KayHian | $25 | 0.275% | 0.22% | 0.20% |
| RHB Securities (formerly DMG) | $25 | 0.275% | 0.22% | 0.18% |
| Stock Holding: Custodian | ||||
| FSMOne.com | $10 | 0.08% | 0.08% | 0.08% |
| Citibank | $28 | 0.25% | 0.20% | 0.18% |
| Standard Chartered | $10 | 0.20% | 0.20% | 0.20% |
| Saxo Capital Markets | $9-$15 | 0.10% to 0.12% | 0.10% to 0.12% | 0.10% to 0.12% |
Broker Assisted Comparison
| Brokerages (Broker Assisted) | Minimum Fees | Trading Fees (based on contract amount) (S$) | ||
|---|---|---|---|---|
| <$50K | $50K to $100K | >$100K | ||
| KGI Securities (formerly AmFraser) | $40 | 0.50% | 0.40% | 0.25% |
| CGS-CIMB Securities | $40 | 0.50% | 0.40% | 0.25% |
| Citibank | $50 | 0.50% | 0.50% | 0.40% |
| DBS Vickers | $40 | 0.375% | 0.30% | 0.225% |
| Maybank Kim Eng | $40 | 0.50% | 0.40% | 0.25% |
| Lim & Tan Securities | $40 | 0.50% | 0.40% | 0.25% |
| Phillips Securities (Poems) | $40 | 0.50% | 0.40% | 0.25% |
| OCBC Securities | $40 | 0.50% | 0.40% | 0.25% |
| RHB Securities (formerly DMG) | $40 | 0.50% | 0.40% | 0.25% |
Cash Upfront Comparison
| Stock Brokerage (Cash Upfront) | Minimum Fees | Trading Fees |
|---|---|---|
| KGI Connex | $25 | 0.18% |
| CGS-CIMB Securities | $18 | 0.18% |
| DBS Vickers | $10 | 0.12% |
| Lim & Tan Securities | $12 | 0.12% |
| Maybank Kim Eng | $10 | 0.12% |
| Phillips Securities (Poems) | $10 (0.08% if you trade more than $250,000) | 0.12% ($8 if you trade more than $250,000) |
| OCBC Securities | $18 | 0.18% |
| UOB KayHian | $10 | 0.12% |
| FSMOne.com | $10 | 0.08% |
Looking at the tables above, you can see that trading fees for small-time investments are higher. Conversely, trading commissions for bigger sums over $100k are lower.
That’s why you should take your trading style into account:
You prefer to buy inexpensive stocks only to sell them for more money when their prices rise. This strategy is good, but you’ll make multiple transactions for which the brokerage firm will tax you. If that’s your MO, consider a brokerage company with affordable transaction fees.
You prefer to buy unchangeable stocks and limit your trades. If you’re not trading a lot, the trading fee is not your main concern.
You should also consider the minimum fee along with the trading fee. This minimum fee is your brokerage company’s minimum rate that you should pay them to manage your accounts. So:
- Opt for a brokerage agency with a low minimum fee if you’re a small-time investor.
- Opt for a brokerage agency with a low trading fee if you’re trading sums that usually go over $10,000.
Here’s why: the minimum fee is fixed so, when your investing more money, this fee represents an increasingly smaller part of the sum you’re investing.
2. Custodian Accounts – To Be Or Not To Be?
At the beginning of this article, we told you that you can open a custodian account instead of a CDP account. We also told you that this option is riskier, and now we’ll discuss why.
Firstly, you saw in the tables above that very low commissions are usually correlated with custodian accounts. That’s a definite advantage because you’ll have a prepaid account where you can pay rates in advance. Thanks to your pre-deposits, these institutions have more capital to keep a trump card on the open market.
However, the subsequent advantage is that your account balance dictates how much you can trade. If you want to buy and sell more stock, you’ll have to transfer more money into your account.
Another disadvantage is that your stocks aren’t kept in a CDP account in your name. Your stocks’ home is this custodian account that doesn’t give you full ownership on your stocks. Therefore, you won’t be able to vote or take part in meetings at the companies where you have shares.
But the biggest risk you incur is in case your brokerage firm becomes insolvent. Your stocks aren’t in your name so that you can lose them in case your company fails.
3. The Trading Platform
The ease of use of your company’s trading platform might seem trivial. However, studies show that intuitive websites help you make better comparisons and better purchase decisions. As such, your investments will become more profitable by the day.
Remember to steer clear from very user-friendly trading platforms. These can get you hooked into trading so much so that trading can become an addiction.
In Conclusion
Hey, you reached the end! Now you know all the basics things about trading and what to consider before choosing a brokerage firm. You also know the differences between custodian accounts and CDP accounts, plus you can compare the pros and cons of different trading styles.
All these advice will bring you more cash flow to navigate the financially troubled times caused by the SARS-CoV-2 pandemic.
Here’s a quick summary before you go:
- Choose a CDP account if you want to have your stocks risk-free in your name. The fees may be bigger, but you get to own what’s yours.
- Choose a custodian account if you’re interested in low commissions, but remember that you’ll still have to pay some maintenance fees. Besides, your stocks aren’t exactly yours.
- Choose a brokerage firm with low trading fees if you’re doing frequent trades.
- Choose a brokerage firm with a low minimum fee if you’re trading rarely or if you’re trading small amounts under $10,000.
