Hi FreeTrade,
I have some confusion around your commission (FX fees) calculations and valuations. Additionally the restrictions of 1 image in posts is rather annoying.
1. First of all do you keep any money from these FX fees or does it all go to a 3rd party who does the currency conversion for you?
The base FX rate always seems to be at the crappiest exchange rate regardless of time e.g. Trade at 20:31 (see fig 1), contract note says Base = $1.384, actual FX rate fluctuated between 1.38412 and 1.38422 (see fig 2 & 3), even if I take the midpoint that is still 1.38417
The actual cost of the shares is (0.02727597 * 251.87)/1.38417=ÂŁ4.96326215
Therefore your actual commission or FX fee is 4.99 - 4.96326215 = 0.02673785
Therefore % commission is (0.02673785 / 4.99)*100 = 0.53582866 or 53bps and not 45bps claimed
And this is not the only example, I have many examples like this one.
2. Where does your FX base rate actually come from, and why is it always the worst value for that minute?
3. Is the FX fee always in whole pennies, e.g. If actual value is a fraction e.g. If 0.0542 do you always round up e.g. To 0.06, or does it follow normal rounding rules?
4. If you do always round up who keeps the difference between 45bps claimed fee and the actual fee (in whole pence) charged - does it go to you or your 3rd party supplier?
The reason i ask is if you place many small trades (few pounds each) the effective commission/fee will be a lot higher than 0.45% and lot higher than placing 1 larger trade.
5. Does the "current value" displayed in fig 4 take into the account the costs of liquidating the position (i.e. Including the 45bps FX fee) - or is purely spot price of shares at the base FX rate?
6. Does the "Avg. Price per share" take into account the all fees (e.g. commissions, FX fees, stamp duty) to enter position and any fees to exit position (e.g. FX fee)?
7. Why is gain/loss showing ÂŁ1.22 (fig 4) when
a. total costs = ÂŁ13.98
b. Change in value is 15.14 - 13.98 = 1.16
c. %change is (1.16/13.98)*100=8.2976%
If the gain/loss doesn’t take into account all fees for entry & exit - it is not a true reflection of the gain/loss associated with the investment.
8. When placing limit orders why is 10% of the limit I specified put into reserve that will never be used to buy any shares (fig 5) - this is in effect reducing my buying power for upto 3 months after which it auto cancels, in effect a 10% cash penalty for placing a limit order. Why can't they actually buy the shares at what ever the current exchange rate is upto the full value of the reserve instead of reducing it i.e. In this example why can't they buy shares all the way up to ÂŁ100 instead of ÂŁ90 (factoring in any fees)?
9. Can you explain how this 3rd party provider for FX & fractional shares actually works, I understand this is it illegal to get payment for order flow in the UK whilst in the USA I think the commission free brokers like Robin Hood use this method. How does it actually work for FreeTrade when trading on US stocks, how do you get the best execution price, how is this achieved and how fast does it happen?
10. How does FreeTrade make it's money when dealing with UK shares?
For the contract notes, can you put in the actual value of shares in the Base Currency e.g. In fig 1 it would be useful to see the actual $ spent on shares.
For the investment summary in fig 4 it would be useful to see current value and avg. Price per share in Base Currency i.e. $ values - when buying these shares the price is listed in the base currency so it is easier to compare with existing position.
emoji is!