5 Things To Understand About Using A Custodian Account When Buying Stocks

When we start investing in stocks and other listed securities on the Singapore Exchange (SGX), we need to open a brokerage account. What may be lesser known to many investors is the fact that our brokerage account only permits us to execute our trades to purchase and sell stocks, and we should also open another account – CDP account or custodian account – to store our investments after buying it or retrieve our investments from as selling it.

The convenient thing would be that the brokerage firm we choose to trade with can help us open these accounts for us. Most brokerages in Singapore offer investors the ability to store their investments in both a CDP account or custodian account.

What Is A CDP Account?

Operated by the Singapore Exchange (SGX), a CPD account supplies a centralised location to store investments registered in our own name. The benefit of this is that we can use one broker to buy and another brokerage firm to market our investments. Similarly, we are able to use more than one brokerage firm to add to our investments in a single counter.

For this benefit, we must fork out a CDP Clearing Fee of 0.0325% from the contract value. In addition, we have to pay an SGX Trading Fee of 0.0075% from the contract value and an SGX Settlement Fee of $0.35, over the brokerage fees we have to pay.

What Is A Custodian Account?

A custodian account is typically operated by its respective broker, rather than in a centralised location. This means we can only buy or sell stocks initially bought with the same brokerage firm if we want to liquidate or add to our investments.

This allows us to bypass the CDP Clearing fees highlighted above, in addition to typically