Beware: TDAmeritrade exorbitant commission for foreign stocks (ADR/OTC)

thecoder · Sep 29, 2021

Beware! Beware! I didn't know this:
Trading a foreign stock (for example ADR stocks via OTC) at the broker TDAmeritrade costs $6.95 commission + $15 "foreign security fee", ie. a total of a whopping $21.95 (!) for each trade (ie. charged each time when buying and also when selling)!...

See also:

Code:

https://www.tdameritrade.com/pricing/brokerage-fees.html   (click on "Exception Fees")
https://www.reddit.com/r/tdameritrade/comments/i0w9eg/foreign_security_fee_15/
https://honda-tech.com/forums/general-discussion-debate-40/over-counter-foreign-stock-help-needed-2591164/

NumberZ · Sep 29, 2021

thecoder said:
Beware! Beware! I didn't know this

Do you happen to know if this is extraordinary compared to other brokers, or is this a common fee structure for these type of shares?

tradegoodstocks · Sep 30, 2021

Try Interactive Brokers and buy the foreign stock at their home exchange. You save not only the exorbitant commissions, but also the recurring ADR fees while holding the stock.

thecoder · Sep 30, 2021

NumberZ said:
Do you happen to know if this is extraordinary compared to other brokers, or is this a common fee structure for these type of shares?

I have no clue, I only know my broker... :-(
I've to close both the position and this broker...

wrbtrader · Sep 30, 2021

thecoder said:
I have no clue, I only know my broker... :-(
I've to close both the position and this broker...

Why did you open an account with TD while knowing about the crazy fees of trading foreign stock or did you open an account with TD to trade something else with reasonable fees but decided one day to trade foreign stocks ???

If the latter above, did they misled you and told you a price that you were happy with and then charged you different (higher) fees that you did not like ???

By the way, I'm not a fan of one broker only as a way that broker is suitable for "everything" when we all know some brokers are suitable for only a few things and we need another broker for other things.

wrbtrader

engineering · Sep 30, 2021

tradegoodstocks said:
Try Interactive Brokers and buy the foreign stock at their home exchange. You save not only the exorbitant commissions, but also the recurring ADR fees while holding the stock.

This.

I have Schwab and IB and use IB for foreign stock and currency.

tradegoodstocks · Sep 30, 2021

engineering said:
This.

I have Schwab and IB and use IB for foreign stock and currency.

Can I ask you what you do with your Schwab account when you also have IB? I for myself see the (for many countries, especially European) higher foreign dividend withholding tax that IB charges as a huge problem for the buy-and-hold investor. Another problem that I have with IB is the aggressive securities lending (as my account is leveraged) that they do, which for me results in a few thousand dollars additional taxes per year from payments-in-lieu. I'm thinking of moving part of my portfolio to Schwab and using box spreads for leverage (so the much higher margin rates at Schwab would not be a problem), to avoid the payments-in-lieu from IB's aggressive lending.

engineering · Oct 1, 2021

tradegoodstocks said:
Can I ask you what you do with your Schwab account when you also have IB? I for myself see the (for many countries, especially European) higher foreign dividend withholding tax that IB charges as a huge problem for the buy-and-hold investor. Another problem that I have with IB is the aggressive securities lending (as my account is leveraged) that they do, which for me results in a few thousand dollars additional taxes per year from payments-in-lieu. I'm thinking of moving part of my portfolio to Schwab and using box spreads for leverage (so the much higher margin rates at Schwab would not be a problem), to avoid the payments-in-lieu from IB's aggressive lending.

I use Schwab for the majority of US stock. I find their customer service to be significantly better. I feel like the UI is better for a buy and hold type investor.
I don't get the impression that they'd be a good platform for foreign stocks though, I think you may see similar high commissions.

I have the IB account set up as a cash account so I don't have to worry about PIL.

I've tried to fight the foreign dividend tax situation with a different broker, Computershare, and I found they didn't seem very interested in correcting the problem. I cited the specific treaty regarding agreed upon tax rates and they continue to collect at the higher rate and leave it up to me to ask for it back. I haven't had to deal with foreign dividends yet with IB but I will, so hopefully they use the proper tax rate.

tradegoodstocks · Oct 1, 2021

engineering said:
I use Schwab for the majority of US stock. I find their customer service to be significantly better. I feel like the UI is better for a buy and hold type investor.
I don't get the impression that they'd be a good platform for foreign stocks though, I think you may see similar high commissions.

I have the IB account set up as a cash account so I don't have to worry about PIL.

I've tried to fight the foreign dividend tax situation with a different broker, Computershare, and I found they didn't seem very interested in correcting the problem. I cited the specific treaty regarding agreed upon tax rates and they continue to collect at the higher rate and leave it up to me to ask for it back. I haven't had to deal with foreign dividends yet with IB but I will, so hopefully they use the proper tax rate.

For most European countries IB will withhold the maximum rate, ignoring treaties. On top, you can't get a refund yourself from most countries because IB won't give you the required documentation to get a refund as they hold the shares in street name. I'm curious what the tax withholding rates are at Schwab for dividends from European countries to U.S. customers.