If you start investing or you already invest, chances are you’ve heard of DEGIRO before. A well-known Dutch broker. DEGIRO introduces zero commission investing. Is there actually commission-free investing? No, there isn’t. Indeed; DEGIRO is implementing a number of price increases and optimizations to strengthen profitability and growth. What does this announcement mean for Dutch investors?
Read more about investing at DEGIRO here.
Commission-free investing on U.S. stock markets
DEGIRO is going after other brokers, such as BUX Zero, and is introducing zero in the Netherlands. Direct transaction fees are no longer charged on U.S. and Canadian exchanges. Yet you are going to pay more. In fact, there is a hefty increase in foreign exchange fees from 0.10% to 0.25%. Currency costs are costs you incur if you want to invest in stocks listed in Dollars with your Euros. This actually increases costs on most transactions. On an investment of about 1,000 euros, there is already a doubling of costs. And if the transaction is even larger, so is the cost increase.
Dutch do not benefit from commission-free investing
DEGIRO’s press release is a bit misleading – to put it mildly: “DEGIRO retailises European Online Brokerage with zero commission trading on top US and European exchanges.” They do say Zero Commission, but there is a real price increase for transactions in U.S. stocks. Also, Zero Commission is misleading for Dutch investors if you want to trade on exchanges in Europe. Indeed, this applies only to primary exchanges in DEGIRO’s main growth markets: France, Spain, Portugal, Italy, Sweden and Denmark. Customers from those countries do benefit. For Dutch investors, yet another disappointment. DEGIRO previously surrendered its AFM license and it was fined by the AFM for failing to comply with the Asset Segregation Act.
Changes costs investing in Dutch stocks
If we look at the changes in fees for investing in stocks, there are some notable changes. The variable fee expires, the fixed fee remains (and in some cases is reduced) and Degiro introduces a fixed fee for third-party fees. What this means? Read along.
Variable compensation expires
For transactions on Euronext Amsterdam, the variable rate will expire and only the fixed rate of 2 euros will remain in place, for both equities and ETFs. This means you pay € for each trade. Fortunately, the core selection of ETFs remains unchanged. Also on the rest of the exchanges, the variable rate for transactions will expire and in some cases the fixed rate will be reduced. The pricing structure of options and futures will be simplified. The commission changes to 0.75 per contract.
Third party costs
To simplify the fee structure (but continue to earn), DEGIRO decided to charge an additional fee. With this, they cover external costs, including clearing and brokerage fees. As of December 20, 2022, almost all products will be charged an additional €0.50 per transaction. These fees do not apply to options, futures, core ETF selection and Tradegate transactions.
What does this mean?
What this means depends on the transaction you are doing. With a €100 transaction, you will pay 47 cents more with the new system. This is a 23% price increase. With a transaction of €1,000, the difference already narrows to €0.20 (price increase of 9%). Large investors benefit (see table below): for a €10,000 transaction, it saves 50% in fees.
DEGIRO introduces Zero Commission, is this right?
Zero commission in particular is a marketing proposition it seems. Investing at DEGIRO may be an option because they have a huge range of stocks and ETFs, at low costs. If you do want to invest without commission, the best way to do so is to buy an ETF from the core selection each month. And do you want Zero Commission investing in stocks? If so, BUX Zero may be an option to explore. However, with BUX Zero you pay a monthly user fee, so you incur costs left or right. For nothing comes the sun 😉
