Trading ETFs in USD with online platform... who has my money and how safe is it?

radicool

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Sep 14, 2006
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257
This question includes aspects of what others have asked, eg:


So I'm trying not to just repeat what they are asking, although there is overlap. Apologies for all the questions.

I have USD in a Standard Bank Isle of Man account. I signed up for their Webtrader platform to invest in ETFs directly in USD. But since they use a whitelabel of Saxo, I thought why not sign up with Saxo directly. But Saxo redirects SA citizens to a local "reseller", DMA (https://dma.co.za/).

So I signed up with DMA too. I now have accounts with SBSA Webtrader. And with DMA. SBSA Webtrader, even though I'm a banking customer, are needing me to deliver original copies of FICA docs, and they require that I manage my W-8 BEN myself. DMA seemed to sort this all out for me, I'm ready to trade.

But now my question is... who are DMA? When I transfer $100,000 to them, it appears on the Saxo platform and I can trade with it. But if DMA disappear, do my investments disappear? Along with all my money? Or is it actually held with Saxo? Or is it actually held with Vanguard if it's one of their ETFs? And I could phone them up and say "please reflect my shares on a new platform?"

In comparison, if I bought Apple shares themselves, through DMA on the Saxo platform, surely even if DMA disappear, somehow those shares are still mine? It's not a lost Bitcoin wallet, the shares don't "disappear". Or do they?

Are there better platforms than Saxo? Is SBSA Webtrader safer because the funds would be "backed" by Standard Bank? Many have mentioned TD Ameritrade... is it "better enough" to make it worth rather using them (and then having to fill out my own W-8 BEN :p ). I'm assuming they must allow SA citizens? Is it possible to migrate platforms once a person holds lots of ETFs, or does one need to basically sell and re-buy everything in the new platform?

I'm just really nervous, I have a couple $100k and the last thing I want to do is get this wrong and have it all disappear.

Thanks in advance.
 

bchip

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Mar 12, 2013
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1,244
This question includes aspects of what others have asked, eg:


So I'm trying not to just repeat what they are asking, although there is overlap. Apologies for all the questions.

I have USD in a Standard Bank Isle of Man account. I signed up for their Webtrader platform to invest in ETFs directly in USD. But since they use a whitelabel of Saxo, I thought why not sign up with Saxo directly. But Saxo redirects SA citizens to a local "reseller", DMA (https://dma.co.za/).

So I signed up with DMA too. I now have accounts with SBSA Webtrader. And with DMA. SBSA Webtrader, even though I'm a banking customer, are needing me to deliver original copies of FICA docs, and they require that I manage my W-8 BEN myself. DMA seemed to sort this all out for me, I'm ready to trade.

But now my question is... who are DMA? When I transfer $100,000 to them, it appears on the Saxo platform and I can trade with it. But if DMA disappear, do my investments disappear? Along with all my money? Or is it actually held with Saxo? Or is it actually held with Vanguard if it's one of their ETFs? And I could phone them up and say "please reflect my shares on a new platform?"

In comparison, if I bought Apple shares themselves, through DMA on the Saxo platform, surely even if DMA disappear, somehow those shares are still mine? It's not a lost Bitcoin wallet, the shares don't "disappear". Or do they?

Are there better platforms than Saxo? Is SBSA Webtrader safer because the funds would be "backed" by Standard Bank? Many have mentioned TD Ameritrade... is it "better enough" to make it worth rather using them (and then having to fill out my own W-8 BEN :p ). I'm assuming they must allow SA citizens? Is it possible to migrate platforms once a person holds lots of ETFs, or does one need to basically sell and re-buy everything in the new platform?

I'm just really nervous, I have a couple $100k and the last thing I want to do is get this wrong and have it all disappear.

Thanks in advance.

Too many questions but to try and answer some of them.

Saxo capital is a bank started in Denmark. They are quite big. Sasfin (a listed South African company - may have heard of David Shapiro?) bought out DMA (the SA Saxo part).
Standard Banks international trader is simply a front for Saxo.
All these companies buy the shares and register it in your name, so if anyone of them went under you wont lose anything. This is a bit different to EasyEquities I believe.

Saxo was the worst service Ive experience, and their fees are very high.

What a few ppl have done on the forum is rather register with TD Ameritrade or Interactive Brokers, both low fees very well known companies.
With these companies if your account is less than $5million (US) then your still considered a small account.
Also - to fill in a W8-BEN is a 30 second process....and all companies will require FICA documentation (overseas and local)


 
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radicool

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257
Too many questions but to try and answer some of them.
Yes, filled with questions :X3: So I appreciate you reading through it all and answering the ones you could and the advice you've provided!
 

smc

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Sep 19, 2005
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I was a Saxo client, and was then migrated to DMA. At the time of the migration, they were simply a white-label on Saxo, so your money was in effect with Saxo. If I recall correctly, that meant with Citi as the custodian. However, there were some plans to change from being a pure white-label, so I'm not sure what the situation is now.

Generally, you can transfer your portfolio from one overseas broker to another directly, usually via The ACATS system (https://www.finra.org/investors/lea...erstanding-brokerage-account-transfer-process), which all US brokerages, and many international brokerages are part of. There's also an equivalent Euro area system. Note however that if you have e.g., European equities in your account, you probably won't be able transfer those to e.g., Ameritrade, which supports only US listed equities. Interactive Brokers probably would accept them though.

Account protection varies by country. In the US, it's SIPC, which is USD500k in protection.
 

baharini

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Dec 16, 2014
Messages
42
Good advice from smc on portfolio transfers and account protection. US brokerage firms need to follow the SEC's Customer Protection Rule, which requires them to segregate client assets from firm assets.

I haven't used Saxo or DMA, but have used both TD Ameritrade and IBKR (Interactive Brokers), and have good experiences with both of them. The peace of mind that comes with having investments held and managed outside of ZA is worth it IMO, and it's really easy to switch brokers and transfer securities between them if needs be.

Interactive Brokers allows for greater flexibility in terms of account funding/withdrawls, exchange support, and currency exchange; whilst there's a $10 monthly fee, it is waived for accounts holding $100k+ of assets. TD Ameritrade has no monthly fees, but they only support US exchanges and don't allow deposits from the Isle of Man, though, as they don't officially do business in the EU.

This is not financial/tax advice, but it's worth noting the potential estate tax implications of holding securities domiciled in the US as a non-US based investor — you will likely have to pay estate taxes on anything over the first $60k of assets. One alternative is using USD-denominated but Ireland-domiciled securities (Vanguard has quite a few of these ETFs such as VUSD) which aren't subject to this, and IBKR allows you to trade these. The Bogleheads' Wiki is quite useful on explaining the tax implications, see https://www.bogleheads.org/wiki/Non-US_investor's_guide_to_navigating_US_tax_traps and https://www.bogleheads.org/wiki/Nonresident_alien_investors_and_Ireland_domiciled_ETFs

As for filling out the W-8BEN form, this post looks helpful: https://mybroadband.co.za/forum/threads/how-to-invest-in-us-stock-exchnages.968687/post-24679170
 
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radicool

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Messages
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This is not financial/tax advice, but it's worth noting the potential estate tax implications of holding securities domiciled in the US as a non-US based investor — you will likely have to pay estate taxes on anything over the first $60k of assets. One alternative is using USD-denominated but Ireland-domiciled securities (Vanguard has quite a few of these ETFs such as VUSD) which aren't subject to this, and IBKR allows you to trade these.

I panic every time I get new information like this, there's so much to understand and I feel so stupid! :oops: But thank you very much, your non-tax-advice provides much useful non-tax-advisement :laugh:
 

Sparky_

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Feb 12, 2021
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Hi,

I've registered with TD Ameritrade and transferred money into a dollar based account with Standard Bank on the Isle of Man. Problem is TD Ameritrade will not accept transfers from the Isle of Man !

Any suggestions on how to transfer money into TD Ameritrade?

Thinking of trying Interactive Brokers instead but that might be a bit more expensive at $10 per month, except one might save using their currency conversion rates.

Many thanks
 

JayM

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Oct 30, 2005
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Hi,

I've registered with TD Ameritrade and transferred money into a dollar based account with Standard Bank on the Isle of Man. Problem is TD Ameritrade will not accept transfers from the Isle of Man !

Any suggestions on how to transfer money into TD Ameritrade?

Thinking of trying Interactive Brokers instead but that might be a bit more expensive at $10 per month, except one might save using their currency conversion rates.

Many thanks

If SB IOM does not support SWIFT payments, IB is no good either, unless you convert to GBP first, in which case you can use the UK faster payments system which will have the funds in your IB account in around 30 minutes. Any trades you make come off the $10 minimum.

If you can get a margin account, IB's margin rates are unbeatable, which is why I prefer them over TD Ameritrade.
 

Sparky_

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Feb 12, 2021
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If SB IOM does not support SWIFT payments, IB is no good either, unless you convert to GBP first, in which case you can use the UK faster payments system which will have the funds in your IB account in around 30 minutes. Any trades you make come off the $10 minimum.

If you can get a margin account, IB's margin rates are unbeatable, which is why I prefer them over TD Ameritrade.
Thanks for the tip regarding faster payments.

SB IOM does support SWIFT payments so hopefully I'll be able to transfer to IB. TD Ameritrade decline payments from the Isle of Man - maybe they think its dodgy.
 

JayM

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Oct 30, 2005
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Thanks for the tip regarding faster payments.

SB IOM does support SWIFT payments so hopefully I'll be able to transfer to IB. TD Ameritrade decline payments from the Isle of Man - maybe they think its dodgy.

TDA does not allow residents from many countries (UK, EU, Canada, Australia and quite a few others), so the declined payment is not due to Isle of Man specifically. Complete non-starter if you ever plan on relocating to any of these locations - TDA will close your account and you'll have to do a position transfer or transfer the funds to a bank account in one of the non-restricted countries.

IB is the best choice for international investors (even with the rubbish customer support, and 90s UI).
 

Messugga

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Sep 4, 2007
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If you're keen on renewables, ICLN looks pretty interesting. Maybe have a look.
 
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