The Hidden Costs In Zero-Commission Trades

hidden costs in zero commission trading

Zero brokerage commissions sound good, but your trade may not actually be free – as a Tiger Brokers customer found out the hard way. As reported in The Business Times (BT), the customer had recently sold about US$5,000 worth of US penny stocks. Not aware of the fine print regarding settlement fees, he was shocked when he saw a deficit of US$11,000 in his account after selling his shares.

It turns out that Tiger Brokers charges a settlement fee of US$0.003 per share with no maximum cap. BT reports that moomoo, another zero-commission online brokerage, charges a similar fee.

The takeaway from this episode is that zero commissions don’t always mean free trades. Additional fees may be hiding in the fine print of different fee schedules.

At Syfe, we believe in being transparent about our fees. The free trades we offer are truly free, with no platform fees and no settlement fees. Customers are charged an ultra-low, all-in fee for commissions outside their free trades. That’s it! No asterisks to take note of and no minimums or caps to remember.

Data compiled by The Business Times

How Syfe Trade works

Syfe Trade does not make money from payment for order flow, a process where brokers sell customers’ stock orders to intermediary trading companies and receive certain rebates in return. There’s a possibility that brokers may be tempted to channel trades to a market maker who offers the best rebates, instead of the best asset price. 

Instead, we give you a certain number of free trades every month and charge a flat fee per trade after all free trades are used. There’s no conflict of interest with this freemium model and our approach is upfront and transparent. 

On our Syfe app, you’ll find plenty of helpful guides on the benefits of diversification and investing for the long haul. This supports our focus on long-term investing, and not gamification, a practice that some brokerages overseas have used to glorify risky stock trading. 

What are the fees for Syfe Trade?

Investing with Syfe Trade is straightforward with our transparent fees. There are no custody, settlement, platform, deposit or withdrawal fees on our platform. 

Here’s an overview of our pricing structure

First three months

  • 5 free trades per month
  • US$0.99 per trade after

Subsequent months

  • 2 free trades per month
  • US$1.49 per trade after

Commission fees are subject to the prevailing GST, where applicable.

For US securities, the US Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) will levy a fee for sell trades. SEC fees and trading activity fees go directly to these institutions. 

Lastly, in order to buy US stocks and ETFs, customers who fund their Syfe Trade account in Singapore Dollars (SGD) will need to convert their funds to US Dollars (USD) first. A foreign exchange fee applies for such conversions, which you can see in your Syfe Trade app. (You may also fund your Syfe Trade account in USD directly if you prefer.)

This step is a safeguard for newer investors. On other brokerage platforms, investors new to US stock trading may think that their SGD funds will be automatically converted to USD and hence not make the currency exchange. If you proceed to buy your US stocks this way, that’s considered a margin trade. In essence, you’re borrowing USD from the broker, which will incur a high interest rate. 

On Syfe Trade, this risk is negated as we automatically convert your SGD to USD for you before making any trades. If you transfer USD funds, no currency conversion will be carried out.

Read the fine print

Although they sound attractive on paper, investors should be alert to the various less transparent fees that can come with zero commission trading. 

If you prefer an easy and secure way to invest in US stocks, consider Syfe Trade. Syfe is licensed by the Monetary Authority of Singapore and individual Syfe Trade accounts are insured by Securities Investor Protection Corporation (SIPC) up to US$500,000 against brokerage failure. What’s more, we offer 24-hour customer support on all US trading days so you can trade with a peace of mind. 

Download the Syfe app today to get started. On top of free monthly trades, all new customers will receive S$60 in cash credits when they fund their account with a minimum of S$1,000 and start trading. 

Previous articleAre Singapore REITs Still A Buy? All Your REIT Questions Answered
Next articleSyfe Cash+: Stability Amid Volatility. 2022 Performance vs Others