Friday, 4 September 2020

Frasers Centrepoint Trust (J69U) Acquisition of Shares in AsiaRetail Fund Limited and Proposed Divestment of Bedok Point


Frasers Centrepoint Trust already owns ~36.89% of the Asiamall Retail Fund (ARF). With this acquisition, they will own the entire 100% and it will be converted to an LLP which allows for REIT tax benefits, rather than being taxed as it is currently held as investment. This transaction also includes a divestment of a Malaysia mall that is held in the ARF.

Both properties are being divested to the Sponsor (Frasers Property (TQ5)).

The funds will be raised from a mix of private placement and preferential offers. The illustrative price of the new units are priced at $2.22, making the adjusted price about $2.42 at the based on the last close.
Price based on 3rd September 2020
Outstanding units from ShareInvestor
The private placement price might be $2.22 so retail investors may end up getting a higher subscription price.
With the completion of the acquisition, the portfolio is much more 'heartland'. I'm still not a fan of Changi City Point though.
The Pro forma DPU increases due to the divestment of Bedok Point. Without Bedok Point, its actually not accretive in the current environment. It's a very good acquisition without the rental rebates but this will depend on how long government support and COVID will last. Will landlords still be able to command the same or even higher rentals going forward?
 
Bedok Point being divested to the sponsor may create some form of conflict of interest. I don't really understand the terms but it most likely will allow the sponsor to inject the property back to FCT at a higher valuation if the property value increases, or at a lower price (but higher valuation) if the property valuations decreases.

Anyway, the acquisition of the ARF was expected for some time as Frasers Property kept increasing their stake it in and acquiring the manager. This might also be a good time for them to divest while property valuations are still high. While the heartland malls are packed, the requirement of social distancing eats into the profit margins of F&B businesses which may require landlords to lower rents to help them. It also feels like the impact of recession is not being felt yet.

Friday, 14 August 2020

Interactive Brokers (IBKR) without the activity fee – IBKR White Labels

 • IBKR White Branding/Labels
 • ZacksTrade - an IBKR white label that I personally use
 • How to fund your Interactive Brokers (IBKR) account
 • How to change currencies in Interactive Brokers (IBKR)

Summary
Interactive Brokers
Zacks Trade
US Stocks
0.0035/share, minimum 0.35, max 1% of trade value
0.01 per share, minimum 1.00
US Options
1 + 0.65 for same option
1 + 0.75 for same option
Activity Fee
10.00 – commission spent
0
Margin
0.86% - 1.59%
2.75% - 3.6%
International Commissions
Cheaper
More expensive
  • White Labels use IBKR's platform and software, securities and cash are held by IBKR. They work as introducing brokers, where they have a direct relationship with you but use IBKR's platform and software.
  • White Labels charge a higher commission than IBKR but generally do not have inactivity fees.
  • Funding can be done via FAST transfer in SGD, and then changed through their platform at close to spot rates (minimum 2-2.5 USD fee).
  • Funding can be as fast as under an hour but do not be too hopeful.


From Interactive Brokers 10-K
Interactive Brokers has several clients using their white branding. These clients of theirs use IBKR's software and platform to cater to their own clients, without having to invest in a brokerage platform. While the commissions tend to be higher than IBKR, most do not have the $10 activity fee which makes it great for non-active investors.

While TD Ameritrade and Tastyworks offer commission-free trading, the foreign currency exchange rates and withdrawal fees make them rather undesirable since my funds will be 'locked' into their accounts unless I pay the withdrawal fee. I will also be subject to my banks' incoming transfer fees and/or unfavorable exchange rates if I wish take change it back to SGD.
IBKR's marketplace has some but its not comprehensive and may not be updated. eFloorTrade doesn't even have working website.

CapTrader is white label based in Germany with a slightly lower commissions for international equities catered mainly towards UK and European customers. Its pretty obvious that they are white label since their own fund deposits pages shows "Interactive Brokers". From their website, your securities and cash are held under Interactive Brokers and covered by SIPC.

Mexem is also another one to consider for international markets outside of the US.

If you make infrequent purchases and want access to other markets, I would definitely consider opening an account with them over Standard Chartered given the better exchange rate and low activity fee of 1 USD per month if your account is below 1000 USD.

With TD and Tastyworks offering commission free stock trades, why use white labels?
  1. Better exchange rates
  2. One free withdrawal a month
  3. Access to markets other than the US


https://www.zackstrade.com/faq/account-opening/zacks-trade-common-questions/
While the commissions are higher than the normal IBKR (especially for international markets), I intend to use this account for long-term investing and do not have to worry about the activity fee in the event that my circumstances do not allow me to maintain an active account.

IBKR has multiple platforms available - Trader Workstation (TWS), Webtrader, client portal and the mobile application. TWS is rather confusing for new people and I feel its a bit unresponsive, but you'll need to in to enter more complex orders. Otherwise, the client portal should suffice for most people. With a white label, I can use the websites or links provide on IBKR's website and it works exactly same, just that the logos are changed. Except for currencies, no live data is provided and you might want to open another platform for prices or refer to Yahoo Finance or Investing.com

Another thing I like is that I can write options without changing my cash first, collecting the premium first, and only changing if I am going to get assigned.
There also appears to be no regulatory/clearing fees for options. While not much, this is 14 cents cheaper than tastyworks or 14% savings per transaction. For every 100 transactions, that's another $14.



Funding using DBS/POSB
How to fund your Interactive Brokers (IBKR) account / funding your Interactive Brokers (IBKR) account
Funding your account works the same as if you had an IBKR account.



1. Log in to your client portal and select the 'menu button'
2. Select "Transfer & Pay" followed by "Transfer Funds
3. Select "Make a Deposit"

4. Select "How to Wire Funds"
5. Fill up the details accordingly
6. Transfer funds with the details provided on the page via your bank account.
7. I add them as a payee for the convenience of future transfers.

Strangely, even though Citibank NA, Singapore and CITISGSGXXX is the SWIFT code for Citibank Singapore Limited and is shown in the instructions, it did not work. However, it worked when I used the CITIBANK NA.

8. Transfer your funds over, remember to include your Account Number and ID. I left out the '/' since DBS did not allow me to enter special characters and it didn't matter.
9. And you're done, wait for IBKR to confirm your funds transfer.




My experiences with funding so far

Transfer #1 using DBS, 1800 (Friday)
  • Transferred on 7 August 2020 (Friday), around 6 pm. (GMT+8)
  • Received by IBKR on 10 August 2020 (Monday), 1.39am (GMT+8) and on hold.
  • Funds available on 12 August 2020 (Monday), not sure of the exact time but it was not available when transfer #2 was done
Transfer #2 using SCB, 0000 (SG Public Holiday)
  • Transferred on 11 August 2020,12.05 am (GMT+8)
  • IBKR received the funds on 11 August, 2020, 1.26 am (GMT+8), available for trading.
For some reason, my second transfer via SCB is much faster, submitting at midnight meant that my funds were already available at ~1.26 AM on the same day.

Transfer #3 DBS and SCB , both around 7.57 pm.
  • Transferred on 13 August 2020, Thursday around ~7.57 PM (GMT+8)
  • DBS transfer available for trading on 13 August 2020, Thursday at 8.20 PM (GMT+8)
  • SCB transfer available for trading on 14 August 2020, Thursday 3.57 AM (GMT+8)
This time, DBS transfer was faster so SCB is not actually faster. While it looks like funding can take place within an hour, I wouldn't count on it and expect at least 1 working day, or before the next market open.




Currency Exchange
How to change currencies in Interactive Brokers (IBKR)

You may change currencies using the Client Portal, TWS desktop application, Webtrader or the mobile application. There is a flat fee of about 2 - 2.5 USD per transaction. While the rates are spot or close to spot, this flat fee acts as a premium when you are changing smaller amounts. For reference, receiving 1000 USD would be about a 0.25% premium over the spot.


Click on the menu button and select 'Convert Currency'
You can then enter the amount of SGD you want to change, or USD you want to receive.



Under order management, choose the Forex tab and enter USD in under 'Symbol' and find USD.SGD

Enter the amount of USD you want to receive in under Quantity, either set a limit order or do a market order.


Select a watchlist and enter USD.SGD or enter it in the Order Entry pad
 
If you click on the amount, you can select SGD to enter the exact amount you want to change, cents not included.
You can submit your order after setting a price to buy, you can just set a market order or at the ask price if you don't want to wait for a 'better' price. This Buy USD(Sell 1,234 SGD) means we want to change SGD to USD.
After entering the amount of SGD you want to change, you can submit the order.


Select Convert Currency in the menu and enter the amount you want to change or receive.



My main reasons for opening a Zacks Trade account

  • No withdrawal fee for the first withdrawal of the month unlike TD or Tastyworks.
  • Ability to exchange my currencies at good rates if I ever need to withdraw, or want to hedge (speculate).
  • I don't intend to trade SGX stocks and prefer to hold shares in my CDP account.
  • Tastyworks assignment fee deters me from doing Cash Secured Puts or Covered Calls.
  • I can write puts without needing to change currencies, and only change it when I get assigned.



  • Interactive Brokers
    Zacks Trade
    US Stocks
    0.0035/share, minimum 0.35, max 1% of trade value
    0.01 per share, minimum 1.00
    US Options
    1 + 0.65 for same option
    1 + 0.75 for same option
    Activity Fee
    10.00 – commission spent
    0
    Margin
    0.86% - 1.59%
    2.75% - 3.6%
    International Commissions
    Cheaper
    More expensive


    If you trade SGX or other markets and make one purchase a month, you might want to consider IBKR (SG) since the activity fee of 10 USD is almost equivalent to other brokers at about ~12 SGD after GST and clearing fees per purchase. For infrequent purchases and markets outside of the US, CapTrader or Mexem may be better suited for you as the international commissions for Zacks Trade is not very competitive.

    There are a number of white labels out there so you might want to compare them first. There might be one that suits you better than the ones mentioned here.
    Finally, for those that are looking to purchase US-dollar Irish-domiciled ETFs such as IWDA or CSPX, Zacks Trade lets you buy them with $1 USD  minimum commission.

    Tuesday, 11 August 2020

    TD Ameritrade offers $0 commission in Singapore. Here are some things to take note of before opening an account.

    Summary 
    • $0 commissions for Stocks and ETFs, $0.70 USD for options
    • US securities only
    • $25 USD withdrawal fees + any incoming fees charged by your bank
    • $75 ACAT fee to transfer all your securities out to another broker
    • Exchange rates may not be favorable (assuming 0.6%) and you only can withdraw in USD
    • Pattern Day Trader (PDT) applies, you cannot make more than 3 intraday trades within 5 business days if you do not have 25,000 USD in your account.
    • Unsure of FDIC/SIPC insurance for the Singapore entity.



    TD Ameritrade
    https://www.tdameritrade.com.sg/why-td-ameritrade/free-stock-trading.html
    TD Ameritrade recently announced commission-free trading for Singapore customers as well. While commissions are $0 for stocks and ETFs, there are exchange and clearings fees though they just add up to a few cents. If you want to try the platform, you can open a paper trading account with them.
    There is also $25 withdrawal fee if you wish to withdraw your funds. Your bank may also charge you for incoming foreign currency when you withdraw your funds. For example, DBS charges $10 for incoming funds.
    If you withdraw to a DBS account, you'll probably have to pay 25 USD + 10 SGD fees to withdraw funds. You might check with your other banks if there are any fees for receiving foreign currency.



    How do they make money if they offer commission free trades?

    Most brokers sell order flow to HFT, institutions and market makers which make use of the data to hedge against or 'scalp'. Even with limit orders, your order may get filled at your price, but the last down price may end up a lower when it does get filled. For long-term investors, this should not be an issue at all.

    The SEC 606 report requires brokers to report the sale of order flow. Basically, they can possibly earn more if trading volume makes up for the lack of commissions.
    https://www.tdameritrade.com/retail-en_us/resources/606_disclosure/tdainc-TDA2055-q1-2020.pdf
    Virtu Financial is one of the HFT firms that purchases order flow from brokers.
    https://s21.q4cdn.com/422114427/files/doc_financials/2020/q2/2020.Q2-Earnings-Supplement-v23.pdf

    Exchange Rates?

    Most transfers to brokerage accounts must take place in your own name, meaning things like Transferwise or Instarem may not as the account is not 'owned' by you.

    TD allows for funding in SGD to their DBS account, where they will then convert your SGD to USD. However, the rate is not known to us. Most of the banks provide overseas funds transfers but they tend to charge a fee for transfering foreign currencies.  Here is the comparison of the rates on 10 August 2020, around 1737.
    https://www.bloomberg.com/quote/USDSGD:CUR
    https://www.dbs.com.sg/personal/rates-online/foreign-currency-foreign-exchange.page
    https://secure.fundsupermart.com/fsm/foreign-exchange-rates
    *IBKR has a ~2-2.5 USD conversion fee
    If we assume that TD gets the 'best' rates from DBS at 1.3823, its 0.63% over the 'spot'. Maybe its not much but for every $10,000 SGD you send over, you are getting ~$45.80 less. If you change back your USD to SGD on your bank's platform, you may be hit by another unfavorable rate again.


    Pattern Day Trader (PDT)

    Before you decide that you want to be the next boy plunger, US brokerages are subject to the Pattern Day Trader. For TD, this happens when you make 3 day trades (intraday) within 5 business days. Buying on one day and selling the next does not count as a day trade. This means that you can only make 3 day trades within a 5 business day window before your account gets 'locked'. According to their website, you not be able to open new positions until you top up your account to meet the $25,000 USD requirement once you are marked as a PDT.


    FDIC/SIPC Insurance?

    SIPC insurance which covers your securities up to $500,000 with a $250,000 limit for cash even if you are a non-US resident. It is unclear whether securities held under the Singapore entity are covered by SIPC as it is not clearly stated.


    Conclusion

    If I didn't already have a Tastyworks account, I would definitely have opened an account with them. Tastyworks also has a withdrawal fee which makes it a pain to transfer my positions or funds back to my bank account.

    On the other hand, IBKR has one free withdrawal a month and you can covert currencies on their platform at close to spot rates. This lets you have control over your currency exposure and lets you withdraw for free once a month and at good rates as opposed to the banks. If you're trading other markets, you can easily transfer your cash over to other markets after you liquidate your US positions in one platform.