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Old 20.06.2010, 15:40
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Interactive brokers in Switzerland

Hello fellow investors,

After much pain and hardwork I have zeroed on Interactive Brokers for making long terms investments in German/US stock exchanges. Nothing fancy, just plain stocks. I have a few questions before I take the plunge.

a) Seems at least a few people have tried interactive broker here, can someone tell me if it is a good brokerage firm, in terms of execution ?

b) When you get dividends from US/German stocks, how much is deducted as withholding tax ?

c) Would you recommend ib ?

To help people who might be considering investing, I will list a few brokerages who offer services in Switzerland and tell you why I chose not to use them.

UBS/Credit Suisse: They are in this for the money (surprise !). You pay a custody fee for them to keep your stock. This can be around 100 chf/year easily (even for small investors). Their brokerage is around 1% i.e. if you buy stock worth of 4000 chf on SIX (Swiss stock exchange) you pay 40 chf+(~3 chf, stamp duty). If you do it on the phone, you pay 80 chf + (~3 chf). You also pay while selling. So you are down 2% to begin with.

PostFinance: No custody fee. Moderate commissions compared to banks UBS/CS. More or less similar to Swissquote. For < 5000 chf you pay 25 chf, 5000-10000 chf you pay 35 chf and so on. If you want to stick with SIX then postfinance is highly recommended. Does its job quite well. The problem comes when you want to invest in say Germany/US exchanges. In this case you need to convert your chf to usd/eur. Their spread is around .04 wide. Which means that they will sell Eur for ~ 1.42 and buy it for ~ 1.38 (when the price is ~1.40). So if you want o convert 4000 chf, you loose 4000*0.02 = 80 chf. This is not ideal. Which brings me to:

Swissquote: Their spread is quite small. If eur is selling for 1.4238 chf then you will probably end up paying 1.4240, or maybe less. Pretty good. they have a similar commission as PostFinance although you can trade for <2000 chf and pay comparable commissions. PostFinance charges the same 25 chf for everything < 5000 chf, even say for 2000 chf (this means > 1%). So you would think Swissquote wins. But no. Swissquote has custody fee. Which means they charge you for keeping your stocks. Again between 12.5 chf - 25 chf /quarter. So, 50 chf-100 chf/year. This brings me to IB or interactive Brokers.

Interactive Brokers: One of the lowest costing brokerages around. Offers many markets to trade on (including the emerging markets such as India). Has slightly complicated rules for brokerages, but one can learn those. Have no custody fee. The only problem is that they ask you for 10$ commission/month i.e., you have to generate 10$/month for them by trading. Otherwise, you pay the difference. For example, if you traded once and paid a commission of 9$, you pay 1$ that month. If you do not trade for a year, then you pay 120$ for that year. It seems that this is like a custody fee, but if you are a small regular investor then you would be able to generate something like this.

I have so far tried PostFinance, UBS and Swissquote. So if you have questions, I will be happy to answer.

For people who are using IB, please add what you can.
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