Test drive: HSBC online share trading
Fee and easy … HSBC Online Share Trading is cutting brokerage fees for clients. Illustration: Peter Riches
What is it? HSBC Bank Australia has made a return to the online share-trading market after an absence of about six years. Its new service, HSBC Online Share Trading, is a rebadged version of Bell Direct's online trading system, a well-regarded low-cost service.
How it works HSBC is charging $15.95 for trades worth up to $15,000 and 0.11 per cent of the value of the transaction for trades of higher value.
Trades will be funded directly from the customer's HSBC transaction account and settled in the same account. Customers can monitor the market and execute trades via computers, smartphones and tablets.
The service offers market analysis and company news supplied by Bell Potter Securities, Australian Company News Bites and the Australian Securities Exchange.
Pros The big plus is the brokerage charge. According to researcher Canstar, the average market brokerage on a $10,000 trade has come down from $25.75 in 2010 and $22.67 last year to the current average rate of $21.07. HSBC's $15.95 charge comes in at the low end, which will suit cost-conscious investors.
The direct online link to an HSBC transaction account is another positive. HSBC Premier is one of the more sophisticated transaction accounts in the market, offering useful features for regular overseas travellers and investors. With the direct link between the trading account and the transaction account, customers have complete supervision of their cash position.
The Bell Direct trading platform that HSBC is using was rated ''outstanding value'' by Canstar in an online share-trading report published in April. Different versions of the Bell Direct service - for casual investors, active investors and traders - were all rated five stars.
Cons At this stage the service is a basic Australian equity offering - no CFDs, no international stocks, no frequent-trader discounts, no premium package and no linked margin-loan facility.
The head of wealth management at HSBC Bank Australia, Michael Danby, says the bank will add the bells and whistles over time.
Some investors may be content to use the HSBC service in anticipation of upgrades but others will want access to the latest developments now. There have been a number of changes in online share trading over the past year. Some online brokers are offering access to Chi-X, the equity market that has been set up in competition with the Australian Securities Exchange.
An increasingly common feature is smartphone apps offering access via Apple, Android and BlackBerry.
Bell Direct's service includes a guarantee that a client's order will be on the market within one second of it being sent to the broker.
If it does not meet the deadline, the clients does not pay brokerage.
The chief executive of Bell Direct, Arnie Selvarajah, says the one-second guarantee is not available for HSBC customers now but will be in the future.
Selvarajah expects HSBC to start upgrading its service quickly. He says HSBC customers who want to upgrade to Bell Direct's more sophisticated trader service (Bell Direct webIRESS) will be able to do so, even though HSBC is not promoting that option.
HSBC's service is at the lower end of the cost spectrum, but extremely price-sensitive investors can do better. CMC Markets offers brokerage of $9.90 a trade and a number of online brokers offer rebates to traders who meet minimum monthly benchmarks.
Selvarajah says: ''There is a bit of a price war going on at the moment but price is not the only thing you should look at when choosing an online broker.''