Stay Local, Trade Global

Interested in trading stocks listed on London Stock Exchange or Tokyo Stock Exchange, but don’t have an account with them due to regulatory restrictions?

So far US investors who want to access global markets can mainly invest through mutual funds offered by the domestic financial industry or individual stocks (ADRs or American Depositary Receipts) listed on US markets. That soon will change with the introduction of E-Trade’s Global Trading, which, according to E-Trade website, has the following features:

• Trade stocks online in six global markets: Canada, France, Germany, Hong Kong, Japan, and the United Kingdom
• Add international diversification to your stock portfolio
• Hedge U.S. dollar exposure with five global currencies
• Easily manage your Global Trading Account online with your other account(s) at Etrade.com

MarketWatch.com yesterday has an article on E-Trade’s new offering. While the information on E-Trade website is very sketchy, the article provides a glimpse into what the new trading system will bring to investors eager to diversify their portfolios. According to the MarketWatch article, traders will pay about $20 per trade in each country and the charges for each currency transaction will be between $15 to $20. In addition, with Global Trading, investors can

• Get real-time stocks quotes during local operating hours for five of the six international exchanges (except Hong Kong)
• Receive streaming news on international markets from Reuters
• Conduct limited research on international stocks
• Hold international currencies in their global accounts
• Earn about 0.1% APY for cash balances in the local currencies between $0 and $4,999 and 1% for $100,000 and more

While the new service sounds exciting, considering the growth of markets outside US (above is a comparison between S&P 500 [red] and the MSCI EAFA Index [blue]), my concern with Global Trading is the fees it charges ($20 per trade plus $15 to $20 to convert dollars to local currencies).

Global Trading is still under development, but you can sign up to get an email notification when it becomes available.

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*Photo from E-Trade.

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