International Share Trading Accounts

This guide answers all your questions about trading international shares and allows you to compare international share trading accounts so you can find a broker to trade easily, cheaply and quickly.

What is international share trading?

International share trading is the process of buying and selling shares in companies listed on global stock exchanges. This allows New Zealanders to trade shares in global companies instead of being limited to companies listed on the New Zealand Stock Exchange (NZX). For example, Facebook is listed on the American stock exchange, Nasdaq. So if New Zealanders wish to buy Facebook shares, they’ll need to do this via an international share trading account.

International share trading brokerage fees

Trading international shares can incur different fees and commissions to what you would pay when trading New Zealand shares.

How to buy international shares from New Zealand

You can trade international shares from New Zealand with an online share trading account. These brokers provide an online platform you can use to conduct trades 24/7. Most providers even have smartphone applications for when you’re on the go.

Which global stock exchanges can I access?

The global markets available will vary between providers so it’s best to check if a provider can access the particular stock exchange you’re looking for before you open an account. However, most international share trading platforms will provide traders access to the following major global exchanges, plus more:

• Australia: The Australian Securities Exchange (ASX)
• United States: The New York Stock Exchange, Nasdaq
• United Kingdom: London Stock Exchange
• Europe: Euronext
• Asia: Japan Exchange Group, Shanghai Stock Exchange, Hong Kong Stock Exchange

What are the benefits of international share trading?

Some of the major benefits of international share trading include, but are not limited to:

• Access more shares. The New Zealand share market only represents less than 1% of the world’s shares. International share trading allows you to access thousands of global shares that you wouldn’t have access to if you were trading on the NZX alone.
• Invest in major global brands. You can invest in shares of major global companies such as Facebook, Tesla, Amazon, PayPal, Google and Apple.
• Diversification. Investing in global stocks as well as local shares will ensure your portfolio is more diversified. An internationally diversified portfolio will help protect you from any major dips in the New Zealand market.
• 24/7 trading. You can trade 24 hours a day rather than being restricted to trade within set hours.

What are the risks of international share trading?

International stock exchanges give you access to many more investment options than those listed on the New Zealand Stock Exchange (NZX), however, it can carry a few more risks than the domestic market. This includes foreign exchange rate risk, liquidity risk and risk from changes in foreign governments. Here are some things to be aware of:

Exchange rate volatility. You will need to convert New Zealand dollars into a foreign currency to buy shares listed on an international stock exchange. When you convert the money back to New Zealand dollars, there’s a risk the exchange rate will be worse than when you purchased the foreign currency.

Liquidity. Capital gains (or losses) are only realised once a sell order is settled. Overseas stock exchanges can have fewer participants and a lower trading volume, so if you’re trading on a small international stock exchange, there’s a chance you may not be able to find a buyer for your shares and will have to sell at a significant discount.

Foreign policy. Just as the New Zealand government’s policies can impact your bottom line, overseas governments can introduce policies and restrictions that can reduce your return on international investment. Many companies also have operations running in politically unstable regions. Political turmoil such as a military coup or civil war can derail foreign investment. Do your homework carefully before investing.

Tax legislation. The capital gains and other tax implications of trading international shares are more complex than if you were only trading New Zealand shares, and you may need to pay for professional tax advice.

Different time zones. You’ll need to manage opposite time zones when buying or selling shares in major international markets such as America and Europe.

What fees and charges are involved with international share trading?

• Admin fee. Some providers charge a registration or ongoing membership/admin fee to use their brokerage services.
• Brokerage fee. The brokerage fee is a flat fee or a percentage of trade, whichever is greater. You may be able to find a deal on brokerage fees as a new customer.
• Foreign exchange commission. The international share trading account provider will take a margin when funds are exchanged from New Zealand dollars to a foreign currency.
• Market fees. A charge or fee for trading in a particular market. For example, sell trades in the US are subject to pay SEC fees and trades in the UK attract a stamp duty charge. Local exchange fees can also apply.

Invest in global exchange traded funds (ETFs) and exchange traded options (ETOs)?

Exchange trade funds (ETFs) and exchange traded options (ETOs) provide alternative ways for New Zealanders to access international shares.

An ETF is a fund traded on an exchange the same way as a share. An ETF is made up of many different types of assets, for example stock ETFs can be made up of hundreds of shares from a certain industry, such as energy or the top companies on a stock exchange. ETFs mirror the movements and return of a particular market and there are global market ETFs that are listed in New Zealand, including:

• US500 (USF) – the top 500 companies on American stock exchange, such as Coca-Cola, Walmart, Nike and Netflix
• AUS TOP 20 (OZY) – the 20 largest listed Australian companies, such as Westpac, Commonwealth Bank and Telstra
• EUROPE (EUF) – Europe’s largest companies listed all over the EU and the UK, including Nestle, British American Tobacco and HSBC

Options contracts (ETOs) give you the “option” to buy a security in the future for an agreed price. For example, equities options let you trade now on the future performance of a company.

Invest in international shares through managed funds

It’s possible to invest in international shares through managed funds, like SmartShares. When you buy and sell units in a managed fund, you can track your units along with other investments, such as shares and ETFs, in the one place online.

How to find the best international share trading platform

When you’re comparing international share trading accounts, make sure to consider the following features:

• Brokerage fees. This is a commission for executing a trade and is a flat fee or a percentage charge, whichever is greater. Brokerage fees are charged per trade. Some providers can offer free brokerage deals.
• Available markets. Where can you trade? Almost every provider can give you access to the US, but not all platforms let you trade in some areas of Asia and Europe.
• If you can trade options. Can you trade ETOs and ETFs as well as shares, and in which markets? Only some international share trading accounts let you trade options.
• Execution speed. Check how long it takes for funds to clear and to execute the trade.
• The buffer. The account provider will take a couple of percentage points extra as a buffer against international currency fluctuations in the time it takes for the trade to clear.
• Exchange rate margin. The account provider will often charge a bit extra on top of the real currency exchange rate in order to make a profit when converting New Zealand dollars to a foreign currency and vice versa.
• Trading platform. Is smartphone compatibility in the form of a mobile app an important feature or are you happy with a browser-based platform? Either way, the trading platform should be easy to use. You should also be able to access account services such as tax, profit and loss, and dividend reporting tools quickly and easily.
• Registration fees. Are you required to pay a registration or membership fee to open the international share trading account?
• Education and research tools. Check which market tools and resources you can access to educate yourself about different companies and foreign markets are on offer. Fundamental analysis and charting tools are key to making better trades.
• Customer support. Can you contact the provider outside business hours? Do they provide a dedicated account manager for clients?

How do I open an international share trading account?

You can apply for an international share trading account online in less than 15 minutes. You can compare accounts in the table above and click through to the site to begin your application.

Eligibility

Application requirements can vary between different international share trading account providers. Generally, eligibility requirements for personal applicants will include:

• Be over the age of 18
• Have a New Zealand residential address
• Have a valid contact number

Documentation and ID needed

If you’re a new customer to the share trading platform, you’ll need to verify your identity before you can begin to make trades. Have the following information on hand when you start your application for a share trading account.

• Photographic identification such as your passport, driver’s licence or proof of age card
• Your IRD number

Companies, organisations and trusts must be registered in New Zealand and lodge a US Withholding Tax Treaty Statement to trade in the United States. If you’re opening the account in the name of a trust or company you’ll also need to supply:

• New Zealand Business Number (NZBN)

Pros and cons of international share trading

Tips for people when trading international shares

International share trading accounts can give you access to some of the biggest names in the world. However, there are risks and issues to consider, for example foreign regulatory considerations, time zone differences and lack of overseas market knowledge. Keep the following tips in mind if you’re just starting out:

• Always have a phone number for your broker
• Check the deposit requirements before signing up
• Trading frequently? You might be eligible for discounts
• Always be aware of the fees involved
• Ensure you have access to the international markets you want
• Ensure the site security – 128 bit encryption is a must