The Motley Fool Discussion Boards

Previous Page

Motley Fool Global Gains / GGM: Intl. Broker Capabilities

URL:  http://boards.fool.com/buying-foreign-stocks-with-etrade-25116796.aspx

Subject:  Buying Foreign Stocks with E*Trade Date:  2/1/2007  3:24 PM
Author:  bunkerbob Number:  55 of 195

I'm trying to figure out if I'm getting a straight story from E*Trade. Based on a post on this board, I thought that I could buy foreign stocks through E*Trade at the regular $9.99 commission rate. But what I was told when I tried was that for $9.99 I could only buy OTC versions of the foreign stocks, offered by a market maker affiliated with E*Trade. The guy I spoke with seemed a little unsure of some of his facts, so I hoped that someone on this board might be able to provide additional info.

I wanted to buy two foreign stocks, one trading in Toronto, one in Paris. If you want to check them out yourself, they are the "Eveready Income Fund" (Yahoo quote EIS-UN.TO), and Pernod Ricard (RI.PA). I phoned E*Trade and was told that I had two choices. E*Trade offered an OTC option to buy the stocks in US dollars through a market maker. EISFF and PDRDF are the respective tickers. If I bought the stocks this way, I could buy them online and pay the usual $9.99 fee. Alternatively, if I wanted to buy them direct, I could be connected with a broker in Paris or Toronto who could place the order directly, but then I would have to pay a "Broker Assist Fee" estimated as $45, and also would have to deal with currency conversions.

The OTC offerings in both cases had bid/ask spreads that were much higher than those of the underlying exchange. eg. the bid/ask for the Pernod Ricard was about 0.1% of stock price on the exchange, and 0.75% on the OTC market maker quote. So on a complete cycle of buying and selling the stock, using say $10,000 as the principle amount, I would expect to lose the 0.65% difference in the bid/ask by using the OTC version, which is about $65. But I would save 2 * $45 broker assist fees or $90, and I would save any currency conversion spread between E*Trade buy and sell rates (I'm assuming E*Trade has a buy/sell spread on currency exchange, but I didn't confirm that). So I decided this time to go with the OTC option, but I'm not very happy about it since it is clearly more expensive than the $9.99 foreign trading that I had hoped for.

Has anyone found a better way to do this, either with E*Trade or another broker?
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us