Stacking commission and currency costs on international fills

Price the international ticket as one stack

As of 5 November 2009, two of four compared retail broker-dealers advertised online international trading with foreign-currency settlement. The other two did not. Among the two platforms that advertised the service, listed market access was 12 versus 6 and listed settlement currencies were 8 versus 6. Those two platforms advertised real-time international quotes in local currency. The two without the service did not.

The editorial reading is that access, quote currency, posted commission, venue levies, and the settlement path belong in one implementation-cost stack. A fill is not treated as executable until that stack is known and the instruction matches how the market is behaving.

What the advertised schedules showed

Advertised online commissions for a Hong Kong stock trade were HKD 250 versus HKD 299 before additional venue charges. Advertised local-market online commissions also differed in Canada at CAD 19 versus 19.99, in France and Germany at EUR 19 versus 19.99, in Japan at JPY 3000 versus 3399, and in the United Kingdom at GBP 9 versus 9.99.

The editorial reading is that a posted commission is only the first line of the stack. It is not, by itself, an executable price.

Venue levies on Hong Kong fills

Hong Kong trades also carried principal-based charges of 0.004 percent as a transaction levy, 0.005 percent as a trading fee, and 0.10 percent as stamp duty on both buys and sells. One compared platform added a 0.002 percent clearing-and-settlement fee with a HKD 2.00 floor and a HKD 100.00 cap.

A venue levy is a percentage-of-principal exchange or clearing charge added on top of the broker's posted commission. The editorial reading is to add those levies before treating the Hong Kong ticket as complete.

Foreign-currency settlement and translation

Foreign-stock settlement could be in US dollars or local currency, and affiliate currency conversion could include a markup relative to unaffiliated third-party rates. Foreign-currency settlement means completing a non-domestic stock trade in the market's local currency instead of converting the ticket into US dollars at the broker.

Currency translation converts a fill, fee, or holding from one currency into another so the trade can be compared with the rest of a portfolio. The accompanying historical editorial linked a slumping US dollar and a desire to diversify assets to financially driven commodity-price rises that were not matched by industrial-production levels seen in 2008.

The editorial reading is that currency translation belongs in the same stack as commission and venue levies whenever the ticket can settle in more than one currency.

Order-type choice after the stack is known

The accompanying historical editorial argued that an executable exit depends on order-type choice and on first identifying whether a market is volatile, trending, range-bound, strongly directional, or drifting with little momentum. Order-type choice is selecting an executable instruction that matches whether the market is volatile, trending, range-bound, or drifting with little momentum.

The editorial reading is that the cost stack states what the ticket will cost if it fills. It does not, by itself, make the fill executable.