The CDP Account: What is it and Do I Need One?

The Smart Investor11-21

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href=https://thesmartinvestor.com.sg/the-cdp-account-what-is-it-and-do-i-need-one/><strong>The Smart Investor</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>[\n\n\n\nShare\n\n\nFacebook\n\nTwitter\n\nLinkedIn\n\nEmail\n\nWhatsApp\n\n\n\n\n\nIf you wish to purchase your shares listed on the Singapore Exchange (SGX: S68), it is necessary to apply for a Central Depository (Pte) ...</p>\n\n<a href=\"https://thesmartinvestor.com.sg/the-cdp-account-what-is-it-and-do-i-need-one/\">Source 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investors?  \nFirst established in 1987, CDP is a wholly-owned subsidiary of the Singapore Exchange (SGX).\nCDP is a platform for retail investors to safekeep the securities traded on the exchange that they own, and this is not limited to just shares and exchange trust funds (ETFs).\nCDP also provides services for other forms of securities, such as bonds, unit trusts, and Singapore Depository Receipts. \nTo register for a CDP account, one must be at least 18 years old and not be an undischarged bankrupt. \nAdditional information will be required, which can be retrieved from MyInfo using your Singpass, facilitating a straightforward application process through SGX’s online application form.\nNow that we have established the purpose of a CDP account, is such an account necessary for new investors?\nCDP vs custodian\nSome readers might be wondering why they did not register for a CDP account when performing their first online trade.\nThis brings us to the difference between custodian accounts and CDP accounts.\nOnline brokerage platforms, such as Moomoo from Futu Holdings (NASDAQ: FUTU) or Interactive Brokers under the Interactive Broker Group (NASDAQ: IBKR), offer custodian accounts only. \nA custodian account means that the broker holds the shares you own on your behalf. \nHowever, you can be assured that your shares are isolated from the broker’s own assets, a regulation enforced by the Monetary Authority of Singapore. \nThis arrangement means that you do not directly own the shares you purchase; consequently, you might miss out on certain benefits typically associated with direct share ownership.\nFor example, investors are unable to exercise their voting rights when shares are held in a custodian account, unlike those who have shares maintained with a CDP account. \nOther benefits for CDP account holders include notices for corporate announcements and access to annual general meetings.\nIf you are an investor who values having direct control over such rights, a CDP account is necessary and is the better option for you.\nAdditionally, if you aim to exclusively invest in companies listed overseas, like on the New York Exchange or the NASDAQ, a CDP account is not required.\nIn these cases, overseas shares are held in custody by the broker’s nominee. \nVarying fees\nInvestors considering opening a CDP account should also take into account the fees associated with trading. \nWhile the account itself is free to open, various fees apply when conducting transactions.\nLet’s unpack it with an example from DBS Vickers Securities, the trading platform operated by DBS Group (SGX: D05) that integrates with a CDP account. \nWhen executing a trade through DBS Vickers, investors will incur an additional 0.0325% clearing fee alongside a 0.0075% fee from SGX (see below), as well as the broker’s respective commission and GST. \nSource: DBS\n Take note that DBS has a commission fee of 0.28%.\nWhile 0.28% seems small, this additional cost can accumulate, especially with large orders, particularly for investors who engage in high-frequency trading.\nFurthermore, if an investor chooses to execute a small order, a commission fee of S$25 might be charged instead of 0.28% of its contract value.\nHowever, commission fees and minimum orders vary from broker to broker. \nThis can become a significant expense over time, potentially acting as a deterrent to some individuals.\nAdditionally, CDP will charge a processing fee of S$75.00 (subjected to prevailing GST) for each failed contract. \nCompared with a platform like Moomoo, which only offers custodian services, the commission fee is much cheaper.\nMoomoo only charges 0.03% commission fee, with a minimum of S$0.99. \nThis is because Moomoo does not incur additional expenses related to maintaining CDP accounts for its users. \nIs it always cheaper to use a custodian account?\nIt may seem that custodian accounts are a lot cheaper compared with maintaining a CDP account.\nWell, this may not always be the case.\nSince the CDP account is owned by SGX, it is not directly tied to any brokers.\nThis means that investors can easily link their CDP accounts to different brokers, allowing them to switch brokers if necessary. \nChanging brokers can be very expensive for custodian account holders, especially when it comes to transferring shares.\nTo illustrate, Moomoo charges a handling fee of S$100 per transfer per Singapore stock to other brokerages or financial institutions.\nAs you can see, a CDP account and a custodian account each comes with pros and cons. \nGet Smart: The option of getting a CDP account\nOverall, whether to have a CDP account really depends on your investment style.\nIf you wish to have direct control of your shares and enjoy the benefits that come along with being a shareholder, a CDP account might be the choice for you, despite potentially higher costs.\nOn the other hand, if you are budget-conscious, a platform offering custodian services would be more optimal. \nSingapore boasts a wide variety of brokers, each offering different fees and benefits.\nChoosing the right one can be challenging.\nThat is why we have compiled a list of some of the most recognised brokers for you to consider.\nIf you are interested or need help identifying one, this link here will assist you in finding the right broker for your needs.\nIf you’re nervous, confused, or worried about buying your first stock, then our latest beginner’s guide to investing can help. It’s easy to read yet packed with valuable insights. Download it for free today, and buy your first stock in the next few hours. Click here to get started.\nFollow us on Facebook and Telegram for the latest investing news and analyses!\nDisclosure: Aw Kai Rui does not own any of the stocks mentioned in this article.\n\n\n\nYahoo\n]","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485465487"}