Zero-commission trades do not mean free trades in many cases 

THE advertisements of online brokerages such as Tiger Brokers and moomoo tout free shares and zero-comission trades, but trading through them can be expensive – as one customer recently found out.

Kong Weng Hong, a sales accounts manager, recently sold about US$5,000 worth of US-listed shares he was holding with Tiger Brokers.

But when he logged in to his account after the trade was completed, he was shocked to see a deficit of US$11,000 instead.

Upon closer inspection, he saw that the brokerage had levied a US$0.003-per-share settlement fee on his trade. And unlike most other brokerage fees, the settlement fee had no maximum cap.

The fee had been effective on trades from Jan 13 this year. Kong had received a notice on it, but had not inspected the exact terms.

Tiger Brokers sent out an e-mail on Dec 27, 2021, informing its users of changes to its fee schedule. But the e-mail did not include details of the changes to the fee schedule itself.

Because Kong had sold his shares for US$0.001 each, the charges were 3 times the value of the trade.

He subsequently found that Tiger Brokers in Australia and New Zealand caps this particular fee at 7 per cent of a trade’s value. 

“I think this is really a potential pothole for Singaporeans. Imagine that before the fees were implemented, you were already holding all your penny shares. Now, you can’t even sell them off because then you would be put in debt,” he said, adding that he has contacted the Monetary Authority of Singapore (MAS) to seek recourse.

In response to queries from The Business Times, Tiger Brokers said it operates separate business entities in each jurisdiction, and caps in the settlement fee are determined by the needs of each local market.  

It also encouraged all investors and account holders to pay close attention to the terms and conditions to ensure that they understand the charges accompanying each trade before investing.

A spokesperson for the Monetary Authority of Singapore (MAS) said the regulator expects brokers to deal fairly with customers and to comply with regulations that require advertisements to not be false or misleading.

“Brokers should not give the impression that a product or service is free if this is not the case. All fees and charges (including changes) should be clearly disclosed and communicated to customers,” she added, in response to queries from BT.

The fee is not unique to Tiger Brokers. Rival moomoo also charges a settlement fee with no maximum cap.

Kong's case is a reminder that investors should be alert to the various fees charged by brokerages here that are advertising zero-commission trades on US-listed stocks.

For instance, quotes for counters listed on the Level 2 NYSE ArcaBook are free on Tiger Brokers. But trades in other shares are levied a US$0.005 commission per share. TD Ameritrade Singapore charges US$7.44 for over-the-counter stocks. 

Online brokerage moomoo, on the other hand, removed its previous commission structure of US$0.0049 per share, with a minimum US$0.99 fee per trade from Apr 13 this year.

Instead, after a 1-year period, users would be charged a flat platform fee of US$0.99.

SEC Fees and Trading Activity Fees, which are levied on sells and go to the SEC (the US Securities and Exchange Commission) and the Financial Industry Regulatory Authority (FINRA) respectively, are also charged, albeit with slightly different per-share charges and maximum caps.