facebookWhat is a cash up front brokerage? Does this mean you only risk losing what you have deposited and not more than that? Do all brokerages offer this cash upfront option? - Seedly

Anonymous

07 Jun 2020

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General Investing

What is a cash up front brokerage? Does this mean you only risk losing what you have deposited and not more than that? Do all brokerages offer this cash upfront option?

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The Growth Hunter

07 Jun 2020

Home-based Trader at https://t.me/the_growth_hunter

With regard to cash upfront brokerage, there are mainly 2 differences: (1) Commission and (2) where are your shares held in

1) For cash upfront, think of it as your NETS debit card. The moment you purchase something, it will be directly deducted from your savings account and paid immediately. Whereas for the normal accounts, think of it as your VISA/MASTERCARD credit card. Although you swipe your card, you do not pay on the spot but only when the bill comes. Hence, bringing it back to the normal brokerage account, you pay only on settlement date, which is Transaction day + 4 (T+4).

2) Where it is being held.

In SG, the Central Depository (CDP) is like a bank that your shares get deposited to and held under your name. Most cash upfront brokerage accounts are custodian accounts, meaning that your stocks are not held directly under your name, but under the brokerage. This means that you may have limited voting rights etc depending on the terms the brokerage has.

I have attached the link with regard to an article seedly had written previously. Hope this will help you with the comparison and more intricate details if any.

https://blog.seedly.sg/the-ultimate-cheatsheet-...

Wishing you a bountiful investing journey!​​​

Cash upfront means - you pay for the amount required to buy the stock before the broker executes the trade for you.

For regular trades - let’s say you buy 500 shares of ocbc bank through dbs vickers, the approx $4500 amount will actually get deducted from your dbs multi-currency account after the transaction is settled. In case your account does not have enough funds on that day, dbs will then sell your ocbc shares in the market, recover whatever they can and then charge you a penalty for their trouble.

In cash upfront, the same day you bought the 500 shares, the amount also gets deducted. so, risk for dbs vickers is much lower.

that’s why the brokerage fee you pay is lower for cash upfront. if you have cash in your acc, upfront is a good option to save on brokerage fees.

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