Online trading should provide you as an investor with and avenue through which you can earn profits. High costs can easily negate a large part of your profit, so it is important that you are aware of what you are paying to try to make money.
Here you can find a list of the major cost categories which apply to trading. Some brokers do not pass on certain costs – such as custody fees or stock exchange fees – to clients. However, the total cost of using a broker is the deciding factor. You can compare total costs using the moneyland.ch interactive broker comparison.
Custody fees pay for the management or safekeeping of securities by a custodian bank. In Switzerland, value added tax (VAT) is added to custody fees. Some brokers do not charge custody fees.
Custody fees can vary depending on the amount, type and origin of securities and the number of positions included. Some brokers charge a minimum custody fee. Some (like Swissquote and Strateo) place caps on the maximum custody fees they charge, so you are never charged more than a certain amount.
Position-based fees make up part of custody fees. The amount you pay as an investor depends on how many unique positions are deposited at the custodian bank. A position is a group or category of securities – generally the same security. For example, multiple shares in one company held within a certain time-frame will normally be counted as just one position. Credit Suisse, for example, charges a minimum fee per position per month, while Bank Cler charges an annual fee per position.
Brokerage fees are charged by brokers on a per-transaction basis. Each broker has its own schedule of brokerage fees, and fees also depend on the amount, type and origin of securities. Brokers may charge a minimum fee for each transaction or place a cap on the maximum fee they charge for a transaction.
Some brokers include stock exchange fees and other third-party service provider fees in their brokerage fees. A few Swiss brokers (like Migros Bank) use standard, flat-rate brokerage fees. Swissquote offers several contracts for which a flat-rate brokerage fee is paid in advance. The periods covered by flat-rate payment differ between contracts. Some brokers offer discounted brokerage fees (when you sign up online for example).
Federal stamp duties
The federal stamp duty is a tax which is levied directly by the federal government every time a security is bought or sold. The stamp duty for Swiss securities is equal to 0.075% of their value. A 0.15% tax is levied on foreign securities. All Swiss online brokers pass on the cost of stamp duties to investors and do not include it in their brokerage fees.
The stamp duty is the most significant third-party cost of trading securities – surpassing stock exchange fees by far in most cases.
Stock exchange fees
Stock exchanges charge a brokers a long list of fees and most brokers pass the cost of these fees on to investors as standard, flat-rate fees. Although they can represent a significant expense, this expense is generally much lower than the cost of federal stamp duties.
Paying a flat rate charge for stock exchange fees is practical because there are numerous factors which can influence stock exchange fees and flat-rate fees help you avoid constant fluctuations in the fees you pay. For example, the Swiss Exchange (SIX) charges different fees based on investors’ commitment level, order types (posters or aggressors), securities categories and transaction volumes (ad valorem fee).
Some online brokers charge account fees – fees which you pay just to maintain an account with them.
Currency conversion fees
When you buy and sell foreign securities, you generate foreign transaction fees. Depending on the currency conversion spread used, these fees can pose a significant expense.
There are numerous fees and charges which can cut into your trading profits. Comparing fees and charges using the independent broker comparison on moneyland.ch is a good first step. It is also important that you avoid transactions with “alligator spreads” - generated costs so high that the transaction is unprofitable or even makes a loss.