International stock trading accounts allow you to access overseas stock exchanges to trade stocks in some of the world’s biggest companies. These online accounts are offered by the major banks and numerous online stock trading platforms. Learn about trading international stocks and how to compare international stock trading accounts.
International stock trading is the process of buying and selling stocks in companies listed on global stock exchanges. This allows Americans to trade stocks in global companies instead of being limited to companies listed on US-based exchanges.
You can trade international stocks from the US with an online stock trading account. These brokers provide an online platform you can use to conduct trades 24/7, and most also have smartphone apps.
Interactive Brokers offers an impressive range of tools and low fees for active or professional investors.
- Create watchlists, set alerts and follow news on the Trader Workstation platform
- Choose from IBKR Pro or IBKR Lite depending on your investing style
- All users older than 21 must meet a $20,000 liquid net worth requirement for a cash account
|Available asset types
Stocks, Bonds, Options, Mutual funds, ETFs, Currencies
|Stock trade fee
|Option trade fee
$0 + $0.65/contract
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 stock 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
Trading international stocks can incur different fees and commissions to what you would pay when trading American stocks. Here’s an idea of the fees you can expect to pay when trading stocks on the Tokyo Stock Exchange or the London Stock Exchange.
|Fidelity International Stock Trading||JPY¥3,000||GBP£9|
|Schwab Global Account||JPY¥2,000||GBP£9|
|Interactive Brokers||JPY¥80 or 0.050% of trade value, whichever is greater||GBP£1 or 0.050%, whichever is greater|
Some of the major benefits of international stock trading include:
- Access more stocks. The US stock market represents about half of the world’s stock trading. International stock trading allows you to access the other half of the market that you wouldn’t have access to if you were only trading on the US markets.
- Diversification. Investing in global stocks as well as local US stocks will ensure your portfolio is more diversified. An internationally diversified portfolio will help protect you from any major dips in the US markets.
- 24/7 trading. You can trade 24 hours a day rather than being restricted to trade within set hours.
International stock exchanges give you access to many more investment options than those listed on the US markets. 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.
- Exchange rate volatility. You will need to convert USD into a foreign currency to buy stocks listed on an international stock exchange. When you convert the money back to US 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 realized 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 stocks and will have to sell at a significant discount.
- Foreign policy. Just as the US 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.
- Tax legislation. The capital gains and other tax implications of trading international stocks are more complex than if you were only trading US 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 stock trading?
- Administrative fee. Some providers charge a registration or ongoing membership/administrative 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 stock trading account provider will take a margin when funds are exchanged from USD to a foreign currency.
- Market fees. A charge or fee for trading in a particular market. For example, sell trades in the UK attract a stamp duty charge. Local exchange fees can also apply.
If you’re not ready to deal with the additional risks, complications and taxes that come with trading on international exchanges, compare accounts that let you trade on US exchanges.
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One way to trade global stocks in the US is with an American depositary receipt (ADR), a US bank-issued certificate representing shares of a foreign stock. These are listed on American stock exchanges and traded like domestic stocks, making these easy ways for anyone to invest in foreign companies.
ADRs are priced in dollars, so investors don’t need to take on the hassle of trading foreign currency on the forex market.
One ADR from a foreign company may represent one or more shares of its stock. Banks take into account the ratio of ADRs to foreign shares in order to make sure they’re accurately priced. US banks also require foreign companies to provide detailed financial data before they purchase foreign stocks and reissue to American investors as ADRs.
Investing in global ETFs and exchange traded options
Exchange trade funds (ETFs) and exchange traded options (ETOs) provide other ways for Americans to access international stocks.
An ETF is a fund traded on an exchange the same way as a stock. ETFs are made up of many different types of assets. For example, stock ETFs can be made up of hundreds of stocks from a certain industry such as energy or mining. ETFs mirror the movements and returns of a particular market and there are many global market ETFs to choose from.
Options contracts (ETOs), on the other hand, 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.
When comparing international stock trading accounts, consider registration fees, brokerage fees, customer support and these other features:
- Available markets. Where can you trade? Almost every provider can give you access to the popular exchanges like the London Stock Exchange, 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 stocks, and in which markets? Only some international stock 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 USD 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.
- Education and research tools. Check which market tools and resources you can access to educate yourself about different companies and foreign markets. Fundamental analysis and charting tools are key to making better trades.
You can typically apply for an international stock trading account online in less than 15 minutes.
Application requirements can vary between different international share trading account providers. Generally, eligibility requirements for personal applicants will include:
- 18 or older
- US residential address
- Valid contact number
Documentation and ID needed
If you’re a new customer to the stock 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 stock trading account.
- Photographic identification such as your passport or driver’s license
- Your Social Security number (optional)
Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.
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. Make sure you know the basics of the US stock market before trying to branch out internationally.