There are hundreds of online stock trading platforms on the internet, and choosing one can be very daunting. If you are a novice, you might end up getting involved in unscrupulous brokers out to make a quick dollar from you. You should ask several questions before proceeding, especially if you intend to trade in international markets such as the Hong Kong market if you are outside Hong Kong.
Is the Service provider Legit?
For the Securities and Futures Commission (SFC) to issue a license, all requirements apply to all online traders tied to all Hong Kong’s securities and futures sectors. You must ensure that the online trading platform has a service provider with a license from SFC by checking on the SFC website. Any bank doing online trading is required to obtain a permit from the SFC under “registered institutions.”
The Hong Kong Monetary Authority regulates banks’ securities and futures transactions. If, by any chance, you choose an overseas company, ensure the said company has a license in that jurisdiction. If it does not have permission, do not use its services. Acquaint yourself with the rules and the investor compensations that apply in concerned markets.
What Services Does The Company Offer?
Make a comparison of the different services offered by various online brokerages and choose that fits your needs. Check:
The service level
Many online brokerages focus on executing business only, with no value addition and lower commissions. They do not offer advice, but go ahead and send orders to the market on receiving them. Others provide different services that might include market news, price quotes, advisory services, margin financing, analytical tools, and discretionary accounts. Consider with care what you need, and which type of firm suits your investment goals. Other than the trade-in local securities and foreign exchange contracts, some brokerage firms also provide trading in overseas derivatives and securities.
Service Access Channels
Your brokerage firm may give you several channels, which include hand-held devices, electronic systems, and wireless access to enable you to access trading. Some firms also offer trading services using conventional means, which include automated phone and human-operated phone trading services.
What Are the Firm’s Fees and Charges?
A brokerage firm must disclose all its charges and fees. The costs and expenses include their commissions, stock transfer and custody charges, collection of dividends fees, and other relevant charges. A service provider is allowed to have different rates for any orders placed via various channels and for the trade of multiple products, order sizes, and order types such as market and limit order. When it comes to value- addition, you need to understand the service offered and the structure of its price, for example, the charges for research tools and real-time quotes, the interest rates against margin loans, and others. You must ensure they are clear on the fees and expenses from the get-go and ask them which arrangement would best serve your interests.
Is The Website User-Friendly?
Make a list of the online brokerages you want to engage and browse through their websites. Their account information and market news must be easy to access. Some brokerage firms provide demos of how they operate. Before you open an account with them, they give you a virtual tour of the trade process. Find out if they have a customer hotline, if its 24/7/365, and how fast they assist.
How reliable is Their System?
Find out how reliable the brokerage firm is, and which security measures exist to prevent unauthorized brokerage and customer data access. Some of these measures include passwords, e-certificates, encryption, electronic signatures, and firewalls. SSL (Secure Socket Layer) and various authentication techniques also secure the safe transmission of sensitive data.
You must understand that the online brokerage’s system has limitations that may bring about inefficiencies while handling massive trade volumes, system delays, or outages. Intermediaries who are licensed by the SFC must have written procedures for handling emergencies and advice clients on the available options for managing their requests. Discuss the options available in advance and prepare yourself for using their alternative options to place your orders.
Getting a reputable online brokerage firm needs due diligence. You must look around for a form that is in line with your investment goals. Research, as questions and go through the firms’ demos to get, a feel of what trading will be like with them. Ask about security systems in place and their customer service assistance.