Trading Transaction Costs

[andyfuller]

Minimising the transaction costs is key so how about we try and compile a comprehensive list of Transaction Costs for the various trading methods which can then be used for reference? Add and/or remove where appropriate but put in a line as to why you have removed/added something at the bottom. Also probably best not to use abbreviations as chances are the list will be used by newbies who won't understand them.

Betfair:

1. Commission on Winnings
2. Premium Charge at either 20%, 40%, 50% or 60%
3. Data Charges
4. Transaction Charges


Spread Betting:

1. The Opening Spread
2. The Closing Spread
3.
4.


Futures:

1. Commission on Trades
2. Capital Gains Tax (18% or 28% yearly allowance of £10,100)
3.
4.

Shares:

1. Dealing Costs
2. Stamp Duty (If the purchase is valued at or under £1,000 no SD is payable, over £1,000 it is 0.5% which is rounded to the nearest £5.)
3. Capital Gains Tax (18% or 28% yearly allowance of £10,100)
4.


Exchange Traded Funds (ETFs):

1. Dealing Costs
2. Capital Gains Tax (18% or 28% yearly allowance of £10,100)
3.
4.

[superfrank]

Betfair:

1. Commission on Winnings
2. Premium Charge at either 20%, 40%, 50% or 60%
3. Data Charges
4. Transaction Charges

Spread Betting:

1. The Opening Spread
2. The Closing Spread
3.
4.

Futures:

1. "Commission" on Trades (comprises commission + exchange fees)
2. Capital Gains Tax (18% or 28% yearly allowance of £10,100)
3.
4.

Shares:

1. Dealing Costs
2. Bid/Ask Spread
3. Stamp Duty (If the purchase is valued at or under £1,000 no SD is payable, over £1,000 it is 0.5% which is rounded to the nearest £5.)
4. Capital Gains Tax (18% or 28% yearly allowance of £10,100)

Exchange Traded Funds (ETFs):

1. Dealing Costs
2. Bid/Ask Spread
3. Management Fee (typically around 0.3-0.5% which is deducted pro-rata from the price on a daily basis)
4. Capital Gains Tax (18% or 28% yearly allowance of £10,100)

When writing it all down it makes you realise how the buggers have the odds stacked against you!

[andyfuller]

Betfair:

1. Commission on Winnings (5% less your discount)
2. Premium Charge at either 20%, 40%, 50% or 60%
3. Data Charges
4. Transaction Charges


Spread Betting:

1. The Opening Spread
2. The Closing Spread
3.
4.


Futures:

1. "Commission" on Trades (comprises commission + exchange fees)
2. Capital Gains Tax (18% or 28% yearly allowance of £10,100)
3.
4.

Shares:

1. Dealing Costs (For example HSBC Charge if done online £12.95 per deal on both the buy and sell so £25.90 to complete a trade irrespective of the number of shares. They charge differently if traded on the phone and for shares that are quoted in € and $)
2. Bid/Ask Spread
3. Stamp Duty (If the purchase is valued at or under £1,000 no SD is payable, over £1,000 it is 0.5% which is rounded to the nearest £5.)
4. Capital Gains Tax (18% or 28% yearly allowance of £10,100) (If trading inside an ISA there is no CGT)
5. Inactivity Fee/Administration Fee (Barclays charge £12 for any quarter you do not trade)(not all brokers charge this)


Exchange Traded Funds (ETFs):

1. Dealing Costs
2. Bid/Ask Spread
3. Management Fee (typically around 0.3-0.5% which is deducted pro-rata from the price on a daily basis)
4. Capital Gains Tax (18% or 28% yearly allowance of £10,100)

[andyfuller]

When writing it all down it makes you realise how the buggers have the odds stacked against you!

You can say that again! Good to get a better understanding of the costs involved!

[superfrank]

Betfair:

1. Commission on Winnings (5% less your discount)
2. Premium Charge at either 20%, 40%, 50% or 60%
3. Data Charges
4. Transaction Charges

Spread Betting:

1. The Opening Spread
2. The Closing Spread
3.
4.

Futures:

1. "Commission" on Trades (comprises commission + exchange fees. Example (Mirus Futures current commissions per contract/trade): http://www.mirusfutures.com/sites/defau ... t_Info.pdf)
2. Capital Gains Tax (18% or 28% yearly allowance of £10,100)
3. Account Deposit/Withdrawal Costs (£/$ exchange rate/commission)
4.

Shares:

1. Dealing Costs (For example HSBC Charge if done online £12.95 per deal on both the buy and sell so £25.90 to complete a trade irrespective of the number of shares)
2. Bid/Ask Spread
3. Stamp Duty (If the purchase is valued at or under £1,000 no SD is payable, over £1,000 it is 0.5% which is rounded to the nearest £5.)
4. Capital Gains Tax (18% or 28% yearly allowance of £10,100) (If trading inside an ISA there is no CGT)
5. Inactivity Fee (not all brokers charge this)

Exchange Traded Funds (ETFs):

1. Dealing Costs
2. Bid/Ask Spread
3. Management Fee (typically around 0.3-0.5% which is deducted pro-rata from the price on a daily basis)
4. Capital Gains Tax (18% or 28% yearly allowance of £10,100)

I've added Mirus Futures current commissions link as an example and 'Account Deposit/Withdrawal Costs (£/$ exchange rate/commission)' to the Futures section.

[andyfuller]

Betfair:

1. Commission on Winnings (5% less your discount)
2. Premium Charge at either 20%, 40%, 50% or 60%
3. Data Charges
4. Transaction Charges


Spread Betting:

1. The Opening Spread
2. The Closing Spread
3. Roll Over Costs (**example needed**)
4.


Futures:

1. "Commission" on Trades (comprises commission + exchange fees. Example (Mirus Futures current commissions per contract/trade): http://www.mirusfutures.com/sites/defau ... t_Info.pdf)
2. Capital Gains Tax (18% or 28% yearly allowance of £10,100)
3. Account Deposit/Withdrawal Costs (£/$ exchange rate/commission)
4.


Shares:

1. Dealing Costs (For example HSBC Charge if done online £12.95 per deal on both the buy and sell so £25.90 to complete a trade irrespective of the number of shares. They charge differently if traded on the phone and for shares that are quoted in € and $)
2. Bid/Ask Spread
3. Stamp Duty (If the purchase is valued at or under £1,000 no SD is payable, over £1,000 it is 0.5% which is rounded to the nearest £5.)
4. Capital Gains Tax (18% or 28% yearly allowance of £10,100) (If trading inside an ISA there is no CGT)
5. Inactivity Fee/Administration Fee (Barclays charge £12 for any quarter you do not trade)(not all brokers charge this)
6. Account Deposit/Withdrawal Costs (£/$ exchange rate/commission/some deposit or withdrawal methods can incur a charge)


Exchange Traded Funds (ETFs):

1. Dealing Costs
2. Bid/Ask Spread
3. Management Fee (typically around 0.3-0.5% which is deducted pro-rata from the price on a daily basis)
4. Capital Gains Tax (18% or 28% yearly allowance of £10,100)


Added in a few examples and point 6 on Share Trading and point 3 on Spread Betting

[superfrank]

On Shares I think 5 is a bit OTT and covered by Dealing Costs (depends on the type of share dealing a/c whether or not such costs apply) - we should keep in fairly straight forward. 'not sure about 6 too, only for non-UK shares?

Another section we should add is

Retail Forex (e.g. FxPro)

1. Bid/Ask Spread
2. Overnight Financing (of positions)

[andyfuller]

Reason I put 5 in on shares was because I was talking to a friend and it was one of the first things he mentioned. He only trades part time and used to have a few accounts, he then consolidated them into one after being charged the inactivity fee with Barclays. So perhaps worth leaving in just so people are aware of it.

Reason for 6 on Shares was because Barclays charge you £20 unless you withdraw cash (I assume from a branch?) if you do a wire (electronic transfer?) they charge likewise with HSBC if you do an electronic fund transfer with a non HSBC account you get charged £30! So perhaps again worth leaving in just so people are aware of it.

Some of them if they could get away with it would probably charge you if you visit their office and accidentally fart

Edit: Though thinking about it you are probably right - there are pages detailing all the little charges you could be hit by so probably best to keep it to the main ones rather than splitting hairs about all the small ones. For example BF charge I think if you use certain withdrawal methods but they are rarely mentioned. So when next updating perhaps remove 5 and 6 like you suggest.

[xitian]

Betfair:

1. Commission on Winnings (5% less your discount)
2. Premium Charge at either 20%, 40%, 50% or 60%
3. Data Charges
4. Transaction Charges


Spread Betting:

1. The Opening Spread
2. The Closing Spread
3. Roll Over Costs (**example needed**)
4.


Futures:

1. "Commission" on Trades (comprises commission + exchange fees. Example (Mirus Futures current commissions per contract/trade): http://www.mirusfutures.com/sites/defau ... t_Info.pdf)
2. Capital Gains Tax (18% or 28% yearly allowance of £10,100)
3. Account Deposit/Withdrawal Costs (£/$ exchange rate/commission)
4.


Shares:

1. Dealing Costs (For example HSBC Charge if done online £12.95 per deal on both the buy and sell so £25.90 to complete a trade irrespective of the number of shares. They charge differently if traded on the phone and for shares that are quoted in € and $)
2. Bid/Ask Spread
3. Stamp Duty (If the purchase is valued at or under £1,000 no SD is payable, over £1,000 it is 0.5% which is rounded to the nearest £5.)
4. Capital Gains Tax (18% or 28% yearly allowance of £10,100) (If trading inside an ISA there is no CGT)


Contracts For Difference (CFDs):

1. Commission on Trades (For example 0.05% of trade value, with a minimum of £3)
2. Capital Gains Tax (18% or 28% yearly allowance of £10,100)
3. Cost of leveraged financing (This is similar to 3 in Spreadbetting, Roll Over Costs. Since you only need to have a margin of the total value in your account, you pay interest on the money you've effectively borrowed)


Exchange Traded Funds (ETFs):

1. Dealing Costs
2. Bid/Ask Spread
3. Management Fee (typically around 0.3-0.5% which is deducted pro-rata from the price on a daily basis)
4. Capital Gains Tax (18% or 28% yearly allowance of £10,100)


Removed 5 and 6 on Shares as suggested.

I've added trading CFDs as I think it's a realistic alternative to shares since there is no stamp duty. I also believe there's only stamp duty on UK shares, and not on US shares, say. (Please correct me if I'm wrong though). CFDs are typically only sold on UK shares. At the moment I'm not sure what the spreads are like on CFDs, but I'd expect much more hospitable than spreadbetting, even after commission/costs. You'll pay capital gains tax on CFDs, but that's not necessarily and issue since financial markets are quite scalable.

Like others in this forum I'm actively looking to move into financial trading. Initially I'm looking at UK CFDs or US stocks. For a decent brokerage that a lot of professionals use take a look at Interactive Brokers (http://www.interactivebrokers.com). I haven't opened an account with them yet, but that's my plan once I'm up to speed.

[andyfuller]

I also believe there's only stamp duty on UK shares, and not on US shares, say. (Please correct me if I'm wrong though).

That is correct from what I can see, you pay it when you buy the shares only as I understand. I think you have to pay a Securities and Exchange Commissions Levy on US Equity sale of 0.00192% of US $trade value (?)

[Iron]

I once asked Capital Spreads the following (re spread betting):

Let's say I buy an instrument with a spread of 2 when its market price is $100, and sell it when it drops to $50. Am I right in thinking that I would buy it from yourselves at $102 and sell it at $48, meaning the spread cost me $4?

Their reply:

When our quote is 100 at 102 you can sell the market at 100. When market drops and quotes 48 at 50 you can buy and you would realise a profit of $50.

As you can see the Buy price was 102 when you opened the Sell position and when the Buy price dropped to 50 you realised a profit of $50. Therefor you only paid the spread of 2.

So with spread betting, it seems your only cost is the opening spread.

Jeff

[superfrank]

yeah the cost is still 2 points whichever way you look at it.

assuming the 'actual' price was 101 and 49 and therefore the move 52 then you get 50 points of it (or lose 54 if you did the opposite).

effectively the opening spread cost is 1 point and the closing spread cost 1 point in your example.

[andyfuller]

I once asked Capital Spreads the following (re spread betting):

Let's say I buy an instrument with a spread of 2 when its market price is $100, and sell it when it drops to $50. Am I right in thinking that I would buy it from yourselves at $102 and sell it at $48, meaning the spread cost me $4?

If the underlying price was 100 and it was a 2 point Spread it would be 99 to Sell and 101 to Buy not 98 to Sell and 102 to Buy as that is a 4 point Spread.

When you come to Sell and the underlying price is 50 the Spread would be 49 to Sell and 51 to Buy.

And finally if you were looking to profit from the fall in price like you said you would have sold, not bought at 99 and then Bought not sold at 51.

Giving you a profit of 48 points on a 50 point move hence a 2 point spread.

[andyfuller]

Betfair:

1. Commission on Winnings (5% less your discount)
2. Premium Charge at either 20%, 40%, 50% or 60%
3. Data Charges
4. Transaction Charges
5.


Spread Betting:

1. The Opening Spread
2. The Closing Spread
3. Roll Over Costs from one day to the next (IG Index Example: http://www.igindex.co.uk/spread-betting ... mples.html)
4. Slippage
5.


Futures:

1. "Commission" on Trades (comprises commission + exchange fees. Example (Mirus Futures current commissions per contract/trade): http://www.mirusfutures.com/sites/defau ... t_Info.pdf)
2. Capital Gains Tax (18% or 28% yearly allowance of £10,100)
3. Account Deposit/Withdrawal Costs (£/$ exchange rate/commission)
4.


Shares:

1. Dealing Costs (For example HSBC Charge if done online £12.95 per deal on both the buy and sell so £25.90 to complete a trade irrespective of the number of shares. They charge differently if traded on the phone and for shares that are quoted in € and $)
2. Bid/Ask Spread
3. Stamp Duty (If the purchase is valued at or under £1,000 no SD is payable, over £1,000 it is 0.5% which is rounded to the nearest £5.)
4. Capital Gains Tax (18% or 28% yearly allowance of £10,100) (If trading inside an ISA there is no CGT)
5.


Contracts For Difference (CFDs):

1. Commission on Trades (For example 0.05% of trade value, with a minimum of £3)
2. Capital Gains Tax (18% or 28% yearly allowance of £10,100)
3. Cost of leveraged financing (This is similar to 3 in Spreadbetting, Roll Over Costs. Since you only need to have a margin of the total value in your account, you pay interest on the money you've effectively borrowed)
4.


Exchange Traded Funds (ETFs):

1. Dealing Costs
2. Bid/Ask Spread
3. Management Fee (typically around 0.3-0.5% which is deducted pro-rata from the price on a daily basis)
4. Capital Gains Tax (18% or 28% yearly allowance of £10,100)
5.


Retail Forex (e.g. FxPro)

1. Bid/Ask Spread
2. Overnight Financing (of positions)
3. Slippage
4. Swap
5.

Added an example link for Roll Over charges on Spreads and added Retail Forex section. Added Slippage to Spread Betting and Forex and Swap for Forex

[jimrobo]

forex - slippage, swap