In today’s article we are going to look at the subject of brokers. This is a basic yet essential topic for anyone who wants to actively invest in the stock market, whether this be in stocks, ETFs, warrants, options, futures, CFDs, or even fixed income.

In today’s article we are going to talk about different brokers, we will tell you what they are, how they work and what you have to look for in order to choose one, whether you are a trader or an investor. Finally, you will also find a review in which we take into account several brokers so that you can find the most interesting one for your case.

After publishing our ebook Investing for beginners, we only needed an article that explained a little more the different brokers that exist, how they work and help you decide which one to use.

This is a basic but essential topic for any investor who wishes to invest in the stock market, be it in stocks, ETF’s, warrants, options, futures, CFD’s or even fixed income.

So let’s start at the beginning…

What is a broker, and what aspects should you take into account when choosing the right broker?

A broker is a financial intermediary which organises the transactions between a buyer and a seller within the financial markets, for a fee. In order to trade on the stock market, an agreement and a license are required for each market, so not just anyone can do it.

In the past, individual investors could only trade on the stock market through major banks and certain financial institutions, with fairly high costs and commissions. But thanks to new technology and the Internet, there are now a lot of online brokers which have made stock market investment cheaper and easier through their intuitive trading platforms and the widespread use of omnibus accounts (securities accounts in which all customers’ shares are held, instead of being nominative), to give just one example.

As well as acting as an intermediary, brokers usually also offer counsel and financial information.

Choosing the best broker for your needs doesn’t simply mean selecting the cheapest option. There are many aspects to consider depending on your investment style (buy & hold, daytrader, long-short investor, using leverage…), the assets you are going to invest in (stocks, financial derivatives, bonds…), the amount you are going to invest, country of residence, etc.

But before even starting to look for the broker which best suits your needs, you need to know the broker’s registration and hiring conditions, as there’s no point finding the perfect broker if you aren’t going to be able to open an account with them.

We have selected 3 brokers to mention in this booklet: with one of them, ”Interactive Brokers”, you can open an account from almost anywhere worldwide (220 countries), with another ”Degiro” you can open an account quite easily but you need to already have a bank account in an EU country, and last of all, with ”TD Ameritrade’‘ you can open an account from more than 100 countries but, as a general rule, not from Europe, Australia, or Canada, although this is sometimes possible.

European residents who cannot open an account with this last broker, but who are set on opening an account with an American broker, can do so with the broker Charles Schwab (very similar conditions) or with the previously mentioned Interactive Brokers.

Below, we have listed 5 point to be aware of when choosing the right broker for you (we will look at these points in relation to the 3 brokers we have selected):

  1. Products offered and the markets in which they operate.

Once you know that you can open an account with a certain broker, you can start to look at the products and markets in which it operates, to see if it will meet your needs in this regard.

You must be aware that, although at the beginning you will probably want to invest only in your local market with basic products such as stocks, it’s possible that in the near future, you’ll want to widen the spectrum, meaning that it may be worth selecting a broker which allows you to invest in different markets and many other products such as ETFs, futures, options, warrants, etc.

  1. Fees (trading, custody, maintenance, levies, on dividends, withdrawing funds).

Thanks to new technology and changes in regulation, all online brokers tend to offer fairly competitive rates, but you still have to pay close attention to all the fees they will charge you with in order to know which of them will be cheaper for you to keep accounts with and invest in.

We are going to analyse the fees charged by each of the brokers we have selected, for buying or selling a particular financial asset on each market, custody costs, stock exchange fees, account maintenance costs (if there are any), fees for collecting dividends, and for transferring or withdrawing funds.

As well as explicit fees, there’s the matter of hidden costs. These are a bit harder to spot, and depend on how good/honest the broker is when it comes to carrying out orders, and the price range/spread that they offer.

Recently, online brokers such as eToro and InteractiveBrokers Lite (not the PRO version) have appeared on the market, and don’t charge explicit fees for buying or selling stocks. They are so widely accepted that the majority of top-tier online brokers are now offering alternative accounts of this type. However, while it’s true that they don’t charge explicit fees, what they are actually doing is increasing the price spread (difference between the quoted price and the price at which you actually buy or sell the security) which often earns them even more than with traditional trading fees. As we’ve said many times before, you have to be very careful with the word ”for free”.

  1. Operation and functionality of the platform. Registration process.

The broker’s platform or application, whether it is for a desktop, through a web browser, or for a mobile or tablet, is the tool with which you will carry out all the operations on the financial markets.

They are generally quite intuitive and easy to use, but there are some which are so comprehensive and offer so many analytical tools that they are a bit more difficult to adapt to. Either way, many online brokers offer guides on how to use them, complete demo versions of the different platforms so you can see if it is what you’re looking for, as well as explanatory videos, webinars, forums, and online chats.

In this section we will also briefly explain the brokers’ registration processes and requirements.

  1. Security and reputation.

We consider this to be one of the most important points, all the more so as the volume of assets to be invested in the broker increases.

In terms of security, the first thing to do is ensure that the broker has the proper licenses (it is authorized to operate within a given market) and that it’s regulated by highly reputable agencies. Some examples which stand out among American and European agencies are the US SEC (Securities and Exchange Commission), the Canadian AMC, the English FDA, the German BAFIN, etc. Here you have a list of the most important agencies worldwide.

Second of all, it’s fundamental that the clients’ assets are held by an entity which is different and independent to that which holds the broker’s assets, this means that the clients’ and broker’s assets are segregated so that, in the event of the broker’s bankruptcy, you will still be able to access all of your assets without them also being in danger.

Last of all, it’s important to know if your investments are covered by a state guarantee fund which provides compensation for any deposited money or securities in the event of the broker’s insolvency.

Currently, almost all developed countries have Guaranteed Investment Funds. The maximum amounts vary considerably from one country to another, starting at EUR20,000 per holder and account across almost all of Europe, among other things because this is the minimum established by the European directive (Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Holland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland), although there are countries which have decided to increase this amount, such as Portugal (EUR25,000), the United Kingdom (GDP50,000) and Spain (EUR100,000), up to the USD250,000 offered by the SIPC in the USA.

No less important is the broker’s reputation, as regulatory agencies are not infallible, and state guarantee funds aren’t exactly unlimited either. In terms of investment, you can never be secure enough.

The largest and most reputable brokers in the world are American: Fidelity Investments, Charles Schwab, Vanguard, E*TRADE, TD Ameritrade, Interactive Brokers…. The problem is that, unfortunately, with many of them it’s rather difficult (sometimes impossible) to hire their services if you live outside of the USA. Such is the case with Vanguard, which only accepts clients with residency in the USA, Hong Kong, Japan or Taiwan, or with Charles Schwab, which accepts clients from the USA, UK, EU, Hong Kong, Malaysia, Thailand, or Singapore, among others.

As well as having a good reputation and being among the most competitive in terms of prices, American brokers have the added advantage that the USA doesn’t share tax information with other countries, which means that any wealth that you have invested with these brokers is invisible to your national tax agency (unless you declare it).

Even so, it’s always important to independently look at the history, financial situation, as well as comments or information, on the broker in question.

  1. Other services (management, advice…)

It’s worth looking at whether the broker offers additional services such as tax or investment advice, forums or chat rooms, webinars, explanatory videos, etc. Also look for whether they can process the W8-BEN form, which reduces the 30% withholding tax on American dividends.

Summary table of the best online brokers for private investors

A quick look at the best brokers:

Broker Markets Trading fees (stocks) Levies and custody Account maintenance Dividends Transfers
Degiro Euro

UK

USA

€4+0.05%

€4+0.05%

€0.50+0.004USD/acc

Included No fee Free (unless scrip dividends) Transfers: €0

Withdrawing: €0

Interactive Brokers Euro

UK

 

USA

0.1%, min €4

min £6. Up £50,000

$0.005/acc Min €1

Included US$10 per month, but if you carry out operations, trading fees will be deducted from the maintenance costs Free Transfers: €0

Withdrawing (one per month): €0

TD Ameritrade USA (including foreign stock ADRs) US$0 Included No fee Free Transfers: €0

Withdrawing: €25

Charles Schwab (minimum $25,000) USA (including foreign stock ADRs) US$0 Included No fee Free Transfers: €0

Withdrawing: €25

The 3 best online brokers for private investors

Interactive Brokers

There are countless lists of the 3, 5 or 10 best brokers in the world for investing in the stock market whether this be (in) stocks, ETFs, derivatives or bonds, but if there’s one thing which almost all of them have in common, it’s that among the highest rankings they always include the same name: Interactive Brokers.

This is undoubtedly one of the best online brokers in the world, both in terms of price, the amount of products and markets that they work with, trustworthiness and security, as well as offering one of the most comprehensive platforms.

Interactive Brokers is an American broker (one of the largest), and was founded in 1995 by Thomas Peterffy.

It allows you to open an account from almost any country in the world. You can use euros, dollars, pounds or many other currencies as a base account, so there is no need to exchange into USD for opening and operating your account.

It offers services to both individual and institutional investors and, as we will see, it offers different types of accounts. We are going to look at the accounts offered by Interactive Brokers PRO, not the ”Lite” account (which, as we saw before, doesn’t charge trading fees, but which applies much wider spreads).

  1. Products offered and the markets in which they operate

It allows you to trade stocks, ETFs, index, bonds, forex, metals and financial derivatives such as options, futures, FOPs, warrants, SSFs, and CFDs in 135 markets across 33 countries.

STOCKS, ETFs and warrants:

European Markets: Austria, Belgium, Estonia, France, Germany, Hungary, Italy, Latvia, Lithuania, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland, the United Kingdom.

North America: USA, Canada, and Mexico.

Asia and Oceania: Australia, Hong Kong, Israel, India, Japan, and Singapore.

CFDs (Contracts for Difference) on stocks, index, and forex: In addition to the markets listed above, with CFDs you can also trade on the following markets: Denmark, Brazil, Finland, the Czech Republic, Russia, and South Africa.

BONDS:

You can purchase both public and private bonds in the USA, and public debt in both Europe and Hong Kong.

OPTIONS AND FUTURES

  1. Fees.

For accounts with a net settlement value of more than USD100,000, without maintenance costs. For the rest, they charge 10 USD per month, but if you generate trading commissions, these operations will be deducted from the maintenance fee. For instance, an investor with a balance of less than USD100,000 who places only a few trades in a month that generate only USD4 in commissions will be assessed a USD6 activity fee.

They don’t charge stock market fees, or commissions for the receipt of dividends. You get one refund per month, free of charge.

Below are the fees for trading operations.

STOCKS, ETFs and warrants
Stock market Fees Notes
USA

Offer some ETFs without transaction fees

$0.005 per share with a minimum of $1 and maximum of 1% of the traded value External costs for maintaining an ADR (American Depository Receipt) are not included.
Canada CAD0.01 per share with a minimum of CAD1 and maximum of 0.5% of the traded value No maximum.
Mexico 0.1% of the traded value with a minimum of MXN60.00 No maximum.
Austria, Belgium, France*, Germany, Hungary, Italy*, Netherlands, Poland, Spain, and Switzerland 0.1% of the traded value with a minimum of €4.00 (CHF10 in the case of Switzerland, HUF200 for Hungary and PLN15.00 for Poland) In order of maximum fee. Austria: €120.

Belgium, France, Germany, Italy, the Netherlands: €29. Hungary, Poland, Spain, Switzerland: no maximum.

*Unsure of the tax for transactions between 0.1-1%.

Norway, Sweden 0.05% of the traded value with a minimum of NOK49 / SEK49 No maximum
Portugal 0.15% of the traded value with a minimum of €6.00 No maximum
United Kingdom Up to GBP50,000 of the traded value = GBP6.00

> GBP50,000 of the traded value – GBP6.00 + 0.05% of the gradual traded value . GBP50,000

In order of maximum commission: 29GBP.

Not including the Stamp Duty of 0.5%

Estonia, Latvia and Lithuania 0.2% of the operation’s value with a minimum of €10.00 No maximum
Israel 0.1% of the traded value with a minimum of ILS15 No maximum
Australia, Hong Kong*, Japan and Singapore 0.08% of the traded value with a minimum of AUD 6.00 / HKD 18 / JPY80 / SGD2.5 No maximum

*Does not include the Stamp Duty, click here for the corresponding rates.

India 1bps with a minimum of INR6.00 Maximum of INR20.

 

BONDS
Stock market Fees Notes
USA, corporate bonds 0.1% x nominal value (10 basic points) with a minimum of $1 Maximum of USD250 or 1% of the traded value.

External commissions not included.

USA, municipal bonds 0.05% x nominal value (5 bps) with a minimum of $1 Maximum of USD125 or 1% of the traded value.

External commissions not included.

USA, Treasury bonds, bills, and notes 0.002% x nominal value (0.2 bps) with a minimum of $5 No maximum. External commissions not included.
Europe (Euronext) 0.1% x nominal value (10 basic points) with a minimum of €2 No maximum. External commissions not included.
Hong Kong, government bonds 0.08% of the traded value with a minimum of HKD18 No maximum. External commissions not included.

 

Forex
Amount traded Commissions Notes
<= USD1,000,000,000 Offer quotes as low as 0.1 PIP. The exchange that they offer is really very good.

To see the fees on options, futures, metals, CFDs, indexes and SSFs/EFPs, click on the respective links.

Exchange rate fees: 0.20 bps of the traded security, with a minimum of USD2. They offer quotes as low as 0.1 PIP. The exchange rate that they offer is really very good.

Other fees:

Last of all, you can click here for information on the fees for less commonly-used services.

  1. Operation and functionality of the platform. Registration process.

 The platform is incredibly comprehensive, and although at the start it isn’t easy to use, over time you will of course get used to it. The plus-side of the platform not being entirely simple is that you have many different options available to you. Below there’s a screenshot of the platform to give you an idea of what it looks like:

They have 2 different platforms:

Webtrader: is a simplified platform which is perfect for those with less experience, or who are going to trade fewer products with basic orders. For the majority of users, especially those who don’t carry out many trades a year, this platform is more than enough.

Trader Workstation: is the complete platform. It’s very powerful, has all the necessary tools for traders, and supports multi-asset trading worldwide using numerous types of orders.

Both platforms are available for personal computers, mobiles and tablets (iOS and Android), and directly through a browser.

It’s possible to open a full demo account so that you can see how the platform works and fiddle around with it a bit.

Some of its interesting features we like: you can generate as many ”watchlists” as you want so you can follow the prices of any stocks which interest you. There are many analytical tools, news wire from the different companies (and paid subscriptions to analytical studies from providers such as Reuters, Dow Jones, Morningstar, and Zacks), real-time quotes (subscription), you can access the fundamentals of the companies, management team, dividend history… you can create alarms, comparative graphs, and much more.

Furthermore, on your account’s management page, Interactive Brokers offer the possibility to receive free, very comprehensive reports which analyse your portfolio, which you can export as a PDF. It details all the trades you have carried out, your past returns organized by asset-type, sectors, stocks, comparison with the benchmarks you want to set, all the dividends you have received, deposits and withdrawals made, etc.

Registering isn’t particularly simple or fast, but with a little bit of patience, it’s possible to complete it from practically any country worldwide. The first thing to do is obviously to select the type of account that you wish you open, which will usually be the account for traders and investors and, more specifically, for individual investors.

You have to fill out the form W-8BEN, and they will also ask you to confirm that you have a sufficient level of knowledge about investing, and several years of experience with a real money account (but you don’t actually have to prove this). You also need a copy of your passport or ID card, as well as a utility bill (telephone, gas, electricity…) as proof of your current address. They no longer have a minimum amount required to open an account .

  1. Security and reputation.

 Interactive Brokers is regulated by the American agencies SEC, FINRA and NYSE, as well as other regulatory agencies around the world. Interactive Brokers’ clients are covered by the Securities Investor Protection Corporation (SIPC) which offers a maximum coverage of USD250,000 per holder and account. On top of this, some clients can access additional coverage of up to USD2,500,000 through the Federal Deposit Insurance Corporation (FDIC).

Furthermore, the company itself (Interactive Brokers Group, Inc.) is in a strong financial situation, with equity amounting to more than USD8 billion.

Money transferred to Interactive Brokers is managed by a separate entity (clients’ assets are held by an entity which is separate and independent to the broker’s assets) and deposited in special bank accounts. Generally, a part of the clients’ funds is invested in US Treasury securities, and the rest is deposited in reserve accounts across several US banks. As the assets are segregated, should the broker go bankrupt, you will still be able to access all of your assets without them also being in danger.

  1. Other services (management, advice…)

There are forums and online chat rooms in multiple languages (English, German and Spanish among others), webinars, as well as videos which explain how to use the platform to trade.

The desktop application has a tool called ”Portfolio Builder” which offers a guide on how to create investment strategies based on key data and research. It also allows you to use algorithms and even develop a programme through its API.

You can fill out the form W8-BEN which reduces the 30% withholding tax on American dividends.

Degiro

DEGIRO is an online broker created in 2008 by 5 former employees of BinckBank in the Netherlands. It’s based in Amsterdam but is currently part of the German group flatex AG.

It’s supervised by the Dutch Authority for the Financial Markets (AFM), although it is also registered in the American Financial Conduct Authority (FCA).

It’s one of the most popular brokers for individual investors in several European countries and is actually the second most used broker within its home market.

To be able to open an account with Degiro, you must have a bank account in an EU country (they do not accept Estonia, Latvia, Lithuania, Romania, Malta, Croatia, Cyprus, Bulgaria) Norway or Switzerland. It must be a traditional bank account, they do not accept accounts with TransferWise, Revolut, Monese, Currency Direct, Currency Cloud or PayPal.

They offer different accounts for different investor profiles: the ”basic” account with which you are unable to leverage or shorting; the ”active” account and the ”trader” account, both of which allow you to use leverage and/or short a stock. With the former, the use of short cash positions is limited to 50% of the available margin, and with the latter the margin extends to 100%. They also have a profile for day traders.

We will now look at its features.

  1. Products offered and the markets in which they operate.

STOCKS:

European markets: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Greece, Italy, Ireland, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey and the United Kingdom.

North America: USA and Canada.

Asia and Oceania: Australia, Hong Kong, Japan, Singapore.

ETFs:

European markets: Austria, Belgium, Finland, France, Germany, Greece, Italy, Ireland, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

Asia and Oceania: Hong Kong and Singapore.

BONDS:

European markets: Belgium, France, Germany, the Netherlands and Portugal.

OPTIONS and FUTURES:

Euronext Derivatives Amsterdam (the Netherlands), Euronext Derivatives Brussel (Belgium), Euronext Derivatives Paris (France), NASDAQ OMX Nordic – Stockholm (Sweden), NASDAQ OMX Nordic – Copenhagen (Denmark), NASDAQ OMX Nordic – Helsinki (Finland), MEFF (Spain), Eurex (Germany), IDEM (Italy), CBOE y CME (USA).

  1. Fees.

They don’t charge for account maintenance, nor are there royalties or fees for receiving dividends (apart from scrip dividends, for which they charge €7.50). They do not charge for withdraws nor transfers.

Below you may find their trading fees.

STOCKS
Stock market Fees Notes
Spain €2.00 + 0.05% Maximum fee of €10 with a limit of €50,000 per operation.
USA €0.50 + $0.004per share External maintenance costs for an ADR (American Depository Receipt) not included.
Germany (Xetra) €4.00 + 0.05% Maximum fee of €60
Austria, Belgium, Denmark, Finland, France*, Italy*, the Netherlands, Norway, Portugal, Sweden, Switzerland, Ireland*, and the United Kingdom* €4.00 + 0.05% Maximum fee of €60. *Does not include the Stamp Duty or taxes on transactions between 0.1 and 1%.
Canada €2.00 + CAD0.01 per share
Australia, Hong Kong*, Japan, Singapore €10.00 + 0.06% *Stamp Duty not included, click here for corresponding fees.
Poland €5.00 + 0.16%
Czech Republic, Greece*, Hungary, and Turkey €10.00 + 0.16% *Does not include the transaction tax of 0.20% on the sales amount

 

ETFs
Stock market Fees Notes
World market €2.00 + 0.03% This is the fee which is generally applied.
Purchase-sale of ETFs without fees Free In some cases, there are no fees for purchasing/selling ETFs. Specifically, once a month for operations over €/$ 1,000 if the purchase is followed by another purchase operation. Here you can see the ETFs for which no purchase fees are applied.

 

BONDS
Stock market Fees Notes
Belgium, France, the Netherlands, Portugal €2.00 + 0.06%
Germany (Xetra) €5.00 + 0.05%  

 

Here you can see the rest of the fees, such as those for options and futures.

Exchange rate fees: 0.10% spread over the official exchange rate for any currency that can be traded. This means that if your account is in Euros and you want to buy American shares, you must first exchange your Euros into dollars at a cost of 0.10%.

Other fees: they charge 0.25% with a maximum of €2.50 per year for each international stock market that you use, which they call the ”Degiro exchange connection fee”. This means that if you were to invest in Spanish, American, and German stocks, you would pay a maximum of €5 per year, which hardly seems relevant.

They offer free, real-time quotes for some markets, such as Amsterdam, Brussels, Lisbon, Paris, or Frankfurt.

  1. Operation and functionality of the platform. Registration process.

 It’s an intuitive platform which is very simple to use. You can trade through their web platform from any browser, or by using the app on your mobile or tablet (iOS and Android).

Registration is free and can be done online in around 10 minutes. Confirmation of identity is done through the bank account that we provide, and you don’t need to fill out any forms. There’s no minimum deposit required to open an account, but they don’t have a demo version that you can use to try out their platform first.

Once you’ve signed up, all you need to do is carry out your first bank transfer. If this is done via Sofort (costs €1), the account will be opened immediately. If it is done manually, it’s free but it can take up to 2-3 working days before you can start trading with the broker.

  1. Security and reputation.

Degiro is regulated through the Dutch Authority for the Financial Markets (AFM) and covered by the Dutch Guarantee Fund which offers coverage of up to EUR20,000 per holder and account.

Money transferred to Degiro is managed by a separate entity (the clients’ assets are held by an entity which is different and independent to the broker’s assets) and is immediately converted to a Monetary Fund, where it’s available for trading at all times. Any money that is not invested is kept in that fund.

  1. Other services (management, advice…)

They do not offer tax or investment advice. Nor do they carry out webinars, but on their website you can find videos which explain how to use the platform.

You can fill out the form W8-BEN which reduces the 30% withholding tax on American dividends.

TD Ameirtrade

This is another broker which is very highly rated in almost all of the rankings.

TD Ameritrade is an American broker which is based in Omaha, Nebraska. It was founded in 1983 under the name Ameritrade Clearing Inc., and in November of last year, ”Charles Schwab”, one of the largest brokers in the world, announced that they intended to buy TD Ameritrade for USD26b.

They offer their services to both individual and institutional investors, and as we will see, they offer different types of accounts. If you are looking to focus your investments in the American market, this is undoubtedly the broker for you. This broker is ideal for both traders who carry out a lot of operations (they don’t have trading fees) as well for less-active investors (they don’t charge for maintenance or inactivity).

Below, we will look at their different features.

  1. Products offered and the markets in which they operate

You are able to trade stocks, ETFs, mutual funds, fixed income, options, futures, and forex. Thanks to their recent investment in ErisX, they are now also going to offer the possibility to trade with cryptocurrencies (both spot and futures), currently it’s only possible to trade with futures using bitcoin (with a minimum balance of $25,000).

STOCKS and ETFs:

TD Ameritrade only allows you to invest in the American market, meaning that if you wish to invest in foreign companies, you would have to do so through the ADRs (American depositary receipts) of foreign companies which are listed on the American stock exchange (usually large-cap companies).

MUTUAL FUNDS:

You can invest in more than 13,000 funds, thus covering a wide range in terms of philosophy, asset categories, and risks. They offer a wide range of funds with no fees nor load fund (more than 1,900). However, for the remaining funds (no load funds), they charge $49.99 for the purchase and withdrawal.

FIXED INCOME:

They offer more than 40,000 American fixed income products: private and corporate bonds, certificates of deposit (CDs), unit investment trusts (UITs), and collateralized mortgage obligations (CMOs), as well as annuities from different American insurance companies, both with fixed and variable income.

OPTIONS and FUTURES:

They offer access to more than 70 futures products, including: energy, gold and other metals, interest rates, stock indices, grains, livestock, and others.

FOREX:

You can trade on a list of more than 70 currency pairs.

  1. Fees

They don’t charge maintenance fees, stock exchange fees, or commissions for receiving dividends. However, they do charge you for account withdrawals: $75 if you wish to settle your account completely, and $25 for each outgoing transfer, whether this be domestic or international.

They are extremely competitive in the American market. Furthermore, they offer real-time American market quotes, completely free of charge.

96.2% of the market orders carried out by this broker receive a better price than the best national average (NBBO) at the moment of routing, divided by the total number of executed orders.

Below are the fees for trading operations.

STOCKS and ETFs
Stock market Fees Notes
USA

 

$0

Except for OTCs (not listed on the American stock market) for which they charge $6.95 per transaction

External maintenance costs for ADRs (American Depositary Receipts) not included.

 

OPTIONS
Stock market Fees Notes
USA

 

$0.65 per contract

 

No assignment fees when carrying out the option.

 

FIXED INCOME
Stock market Fees Notes
USA, corporate bonds No fees or $1 per bond They may charge a small profit margin.
USA, municipal bonds No fees or $1 per bond They may charge a small profit margin.
USA, Treasury bills, bonds, and notes Issued at a public auction=no fees On the secondary market: fee based on net yield
Newly issued certificates of deposit (CDs) and secondary market Fee based on net yield
Newly issues unit investment trusts (UITs) and secondary market No fees The issuer charges a placement fee.

 

FUTURES AND OPTIONS ON FUTURES
Market Fees Notes
USA $2.25 per contract (plus exchange rate and regulatory fees)

 

Exchange rates may vary depending on the stock market and product. Regulatory rates are established by the National Futures Association (NFA) and are currently $0.02 per contract. They don’t charge daily fees for overnight positions.

As for FOREX: currency pairs are traded in 10,000 unit increments and they now do not charge a direct commission (previously it was $0.10 for every 1,000 units with a minimum charge of $1.00). However, the transaction fee is reflected in the bid/ask spread.

  1. Operation and functionality of the platform. Registration process.

 TD Ameritrade is known for its amazing trading platform Thinkorswim which is available on desktop, mobile and tablet (iOS and Android), and smartwatches (the platform syncs data across all devices).

The only problem with this platform is that it’s so comprehensive and has so many configuration options, windows, and analytical tools, that it can be difficult to use at first. Because of this, they also offer a simpler platform called Web Platform (which can be accessed through a browser).

Some features of the Thinkorswim platform that we particularly like include the fact that it allows you to generate as many ”watchlists” as you wish so that you can follow the prices of any stocks that interest you. There are many analytical tools, news cables from the different companies, real-time quotes (free), you can access the fundamentals of every company listed, management teams, dividend history… you can create alarms, comparative graphs, and much more. You can also watch the CNBC news live.

There’s a complete demo version of Thinkorswim so that you can practise investing up to $100,000 with virtual money.

The registration process is very similar to that of Interactive Brokers. For those who are not residents in the US it’s rather long, but not particularly complicated if you understand English. You can open an account from most countries worldwide, but currently, in principle, it’s not possible from Europe, Australia, Canada, or the UAE, among others. The best thing to do is try and see if it works.

You have to sign up through their website. You must provide some personal information, including your tax address, income, job, and assets, among other details. They’ll ask you to confirm that you have investment knowledge, and several years of experience using a real money account (but you don’t need to prove this).

You have to select the type of account that you would like to open. There are various options but generally people choose between the ”Standard account” or the ”Margin trading” account, for the latter you have to choose the option ”Actively trade stocks, ETFs, options, futures or forex”. With this account you can trade with more products and invest in a leveraged way.

As well as signing the opening form, you have to submit the following documents via email or fax:

  • Copy of your passport
  • Bank statement or an alternative document such as a utility bill (gas, water, electricity) as proof of your current address.
  • The W-8BEN form, completed and signed.

The entire process doesn’t take a long time, but seeing as foreigners must activate their account manually, it may take anywhere between a couple of days to a few weeks.

There’s no minimum investment required to open an account with this broker, but if you choose the ”Margin trading” account, a minimum of $2,000 must be held with the broker, whether this be in the form of money or securities.

  1. Security and reputation.

TD Ameritrade is regulated by the US agencies SEC, FINRA and NYSE. TD Ameritrade’s clients are covered by the Securities Investor Protection Incorporation (SIPC) which offers a maximum coverage of USD250,000 per holder and account. However, please note that any futures and forex contracts are not protected by the SIPC.

Furthermore, should you lose money or securities in your account due to unauthorised activity, TD Ameritrade promises to reimburse you for the money or securities which have been lost.

In addition, this broker has a solid financial situation, with equity of over USD8b, which will be strengthened following its acquisition by Charles Schwab, making it one of the market’s leading brokers.

Money transferred to TD Ameritrade is managed by a separate entity (the clients’ assets are held by an entity which is different and independent to the broker’s assets) and deposited in special bank accounts. Generally, part of the clients’ funds are invested in US Treasury securities, and the rest is deposited in reserve accounts across several US banks. As the assets are segregated, should the broker go bankrupt, you will be able to access all of your assets without them also being in danger.

  1. Other services (management, advice…)

They have forums, online chat rooms, webinars, and more than 200 videos which explain investment and how to use their platform.

They also offer free financial advice on the use of ETFs and financial derivatives such as options and futures (articles, video courses, guides, etc.). You can pay for courses and newsletters with recommendations and strategies from highly experienced traders.

They also have their own TV channel available to stream during the American market trading sessions from 8:00 ET to 5:00 ET, and CNBC’s live financial news channel.

You can fill out the W8-BEN form, which reduces the 30% withholdings tax on American dividends.

Withholding taxes on dividends

Below we have included a summary table which details the withholding taxes on dividends which are applied in different countries, which may be of use to those with an investment strategy focused on shares of companies that pay dividends:

COUNTRY WITHHOLDING COUNTRY WITHHOLDING
Albania 8% Kenya 0%/10%
Algeria 15% Kuwait 0%
Andorra 0% Latvia 0%/20%
Anguila 0% Lebanon 10%
Antigua & Barbuda 25% Lithuania 0%/15%
Argentina1 7%/35% Luxembourg 0%/15%
Armenia 5%/10% Macedonia 10%
Aruba 0%/5%/10% Malawi 0%/10%
Australia 0%/30% Malaysia 0%
Austria 27.5% Malaysia REITs 10%
Azerbaijan 10% Malta 0%
Bahamas 0% Mauritius 0%
Bahrain 0% Mexico 10%
Bangladesh 20% Mexico REITs 30%
Barbados 0%/5%/25% Montenegro 9%
Belarus 5%/12% Morocco 15%
Belgium 0%/15%/20%/30% Namibia 10%/20%
Benin 7%/10%/15% Netherlands 0%/15%
Bermuda 0% New Zealand 0%/15%/30%
Bosnia-Herzegovina 5%/10% Nigeria 7.5%/10%
Botswana 7.5% Norway 0%/25%
Brazil 0% Oman 0%
British Virgin Islands 0% Pakistan 15%
Brunei 0% Palestine 0%
Bulgaria 0%/5% Panama 5%/10%/20%/40%
Burkina Faso 12,5% Peru 4.1%/5%/6.8%
Cambodia 14% Philippines 15%/30%
Cameroon 15% (16.5% including surcharge) Poland 19%
Canada 25% Portugal 0%/25%/35%
Cayman Islands 0% Qatar 0%
Chad 20% Romania 5%
Chile 35% Russia 5%/15%
China 10% Rwanda 15%
Colombia 10%/32% Saudi Arabia 5%
Costa Rica 5%/15% Serbia 20%
Cote d’lvoire 10% Singapore 0%
Croatia 12%/20% Singapore REITs 10%
Cyprus 0% Slovakia 0%/35%
Czech Republic 15%/35% Slovenia 15%
Denmark 27% (but companies can reclaim 5%) South Africa 0%/20%
Dominican Republic 10% South Korea 22%
Ecuador 0% Spain 19%
Egypt 10% Sri Lanka 14%
Estonia 0% Sweden 0%/30%
Finland 20% Switzerland 35%
France 28%/75% Taiwan 21%
Georgia 5% Tanzania 5%/10%
Germany 25% (26.375%including surcharge) with possible 40% refund for effective rate of 15.825% Thailand 10%
Ghana 8% Trinidad & Tobago 5%/10%
Greece 5% Tunisia 10%/25%
Hong Kong 0% Turkey 15%
Hungary 0% Turkey REITs 0%
Iceland 0%/20% Uganda 15%
India 20% U.K. 0%
Indonesia 20% U.K. REITs 20%
Ireland 0%/25% U.S. 0%/30%
Israel 4%/15%/20%/25%/30% Ukraine 15%
Italy 1.2%/26% United Arab Emirates 0%
Jamaica 33.33% Venezuela 0%/34%
Japan 15%/20% (15.315%/20.42%including surtax) Vietnam 0%
Jordan 0% Zambia 20%
Kazakhstan 0%/15%/20% Zimbabwe 10%/15%

And that’s it for today.

We hope that this article on the different brokers has been useful to you. You may also be interested in our ebook Investing for Beginners in which we tell you everything you need to know if you want to start investing. Of course, if you need information more adapted to your specific case, you may prefer to book a consultation directly.