Trade with 0 fees equals x% return?

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JM investor joined discussion · May 24, 2022 07:37

Futu MooMoo's Free Commission= A marketing Gimmick?

Oh well, this could be a sensitive topic in Moo Moo's community. Hopefully the Moo Moo's modulators won't feel heart attack on my topic.

But, I think it is important to let the MooMoo's community knows the truth!

As usual, you may watch the full video here for a much better illustration. This topic can be quite dry, thus video is a better visualization tool!

Futu MooMoo Tutorial 2022 | Is $0 commission a marketing gimmick? Fine Print Spotted!

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To prepare this video, I have spent a lot of time to look for the information required. Please motivate me by giving me a like on this video, and subscribe my channel! My currnet target is to reach 340 subscribers.

In 07May2022, The Business times published a report stating Zero-commision trades don’t mean free trades in many cases. In this report, a sales manager noticed a defiit US$11000 in his account after sold his shares! The problem is the settlement fee. Although this happened in Tiger broker, but, we could see that MooMoo also has the exactly same settlement fees to the Tiger broker.

Futu MooMoo's Free Commission= A marketing Gimmick?

And… On the MooMoo marketing material on the free commission, do you see the star here, and here?? That means, we need to read the fine print carefully!

Hello everyone. Now Futu MooMoo is advertising its $0 commissions on US stocks everywhere. We can even see the advertisement in Jay Chou Carnival World Tour in Singapore!

Is this true? Is this a marketing gimmick? In this video, I will analyse each fine print of this to identify if Futu MooMoo a really “0” commission platform. I will also perform real trade, to check the commission structure of Futu MooMoo myself.

Please note that I access all the links on 16May2022.

https://www.futusg.com/en/fee/stocks

First, for the $0 commission package, it involves the followings:

The keyword here is US stock. So this promotion is not applicable to stocks listed in Singapore and Hong Kong exchange. The commission is $0 forever. Next, the $0 platform fee is for one year. It also shows a $0 free Nasdaq real-time quotes, free NYSE Arcabook Lv2 after account opening.

First, look on the $0 commission forever.

Oh well, there is a star again. Let us “click here” to further check the Term and conditions.

First is the eligibility. Singaporean, or non-Singapore citizens are residing in Singapore with a valid proof of Singapore residential address. Thus, I guess PR, work pass or social pass are also eligible. But this is not our focus of our video today.

Again, here I would like to emphasize the free commission is valid for US stock trading only. US stock commission will be zero permanently, while platform fee will be US$0.99 per order. Also please take note that US option, it also has a different pricing.

Platform fee. For old customers like me, the free period will be until 12 Apr 2023. For new customer, the free period will be until 1 year from the date you have opened your account.

Next, the 3rdcondition is referring the fees charged by regulations exchanges and the 3rdparty institutions. These are the SEC fees (sells only) and settlement fee and trading activity fees. These are charged by SEC, US settlement agency and FINRA. These fees are not included in the zero commission. Let me check why we need to pay these fee.

The 1st one is SEC fees for selling only. SEC stands for U.S. Securities and Exchange Commission. SEC is part of the US government, which is a regulatory agency responsible for protecting investors, maintaining fair and orderly functioning of the securities markets. SEC fee is easily understandable- it is a fee we pay to for the US government to cover the costs involved in regulating equity dealers and the equities market. We can take it like a “tax” charged by the government, when we sell our shares.

The 2nd one is settlement fee. The definition for settlement is “The transfer of ownership involving the exchange of securities and payments”. When we buy shares, means we buy the shares from someone else, who sell the shares to us. Similarly, when we sell shares, someone will need to buy over it. The ownership is transferred. The US settlement agency is responsible to settle all of these ownership transfer. Can you imagine if we pay and buy a share, but the seller claims that they never receive the payment and not willing to let go of the share? The settlement fee is to pay these US settlement agencies to help us to settle all the ownership transfer.

The last one is the trading activity fee (TAF) charged by FINRA. FINRA stands for "Financial Industry Regulatory Authority”. I did a brief check on FINRA. It is a US government authorized firm and a self-regulating body of the brokerage industry. FINRA is not part of the U.S. government.

Instead of individual investor, FINRA is regulating its members, which are consisting of brokerage firms and exchange markets. The self-regulatory FINRA can only impose its rules on members, and it is responsible for regulating and licensing broker-dealers. We can think of FINRA is the filter in the financial market to only allowing firms, which can comply with the rules and regulation to sell and promoting the securities. FINRA also acts like these firm or brokerages examiners, to oversee their operation and make sure they operate in a compliant manner. Therefore, in order to sell or trade any securities, firms must be authorized and licensed by FINRA.

Last but not least, FINRA also has enforcing power and enforcing rules that govern brokers and dealers. For instance, FINRA fines broker-dealer for sharing customer data with third party vendor.

In addition, one of the main roles on how FINRA protects us is FINRA regulates securities – i.e, financial instruments, such as stocks or bonds – that can be traded freely on the open market.

In brief, we can think of we pay this fee as an insurance to thank for them for supervising and regulating the brokerage firm for us.

https://www.moomoo.com/sg/about

If we go to the above link, we can also see that Futu MooMoo mentions they are also part of the FINRA organization.

However, never trust on a single party. Let us dig the information from the FINRA.

https://www.finra.org/about/firms-we-regulate/broker-dealer-firms-we-regulate/6

From the link of the FINRA, this links shows that yes, Futu is one of the firms registered under FINRA.

Thus, the fee charged is for FINRA, not by the Futu MooMoo. Unlike the SEC fee and settlement fee, FINRA fee has a max cap of $6.49 per trade.

My conclusion is, it is valid for Futu to charge the trading activity fee as they are member of FINRA.

Live Trade Check

To check the fee imposed by the MooMoo platform, I bought 1 UNH share and sell 1 AMC share on 17May2022. Please note that AMC is a gift stock from MooMoo activity. I am not a fan of hype stock.

From my fund history, we could see that my stock buy and stock sell executions are recorded here and here. However, only stock sell fee is recorded. Thus, I could assume that no stock buy fee is charged. No commission and no platform fee!

I also checked the transactions completed before 13Apr2022. We could see that the stock buy fee was charged. The stock buy fee consists of the $1 platform fee and 7 cents GST before 13Apr2022.

Next, let me check the stock sell fee of the AMC share. The stock sell fee costs me 2 cents. 1 cent of TAF and 1 cent of SEC fee. Both are the minimum. No commision and platform fee were charged.

For the transaction before 13Apr2022, the stock sell fee consists of $1 platform fee, 7 cents GST, 1 cent of SEC fee and 1 cent of TAF fee.

Thus, Futu Moo Moo indeed removed the platform fee, and the commission is at $0 now for US stocks.

In fact, I am also using TD Ameritrade as my broker platform for US stock trading. TD ameritrade also claims they are a free commission platform.

From the list here, we can also see that TD ameritrade also charges 1 cent when I sold my shares. Thus, it is a common practise for the broker to separate commission and the other miscellaneous fee.

Conclusion:

This is the common fee schedule for the Futu Moo Moo platform:

We buy share:

Futu charges us commission and platform fee.

We sell share:

Futu charges us commissions, platform fee. Then, SEC fee, settlement fee and TAF fee. SEC and TAF are the fee paid as administrator costs to the agencies who protect us. Settlement fee is paid to complete ownership transfer. What Futu advertises is waiving the commission permanently and platform fee for 1 year.

We can relate this to property buying. If a very good agent told us that he or she will offer us free commission, but we still need to pay legal fee, levy, stamping fee etc. The legal fee, levy or the stamping fee are equivalent to SEC fee, settlement fee and TAF fee. Agent nor the broker will receive these fees.

To me, SEC, settlement fee and TAF fee are very small and they won’t incur huge sunk cost to my transaction. In addition, if my stock provides dividend, I can easily earn them back. But please take note that as settlement fee is charged per share and there is no maximum cap, please be cautious if you are a penny stock traders. You must include the settlement fee in your P/L calculation, as you may trade many shares of a penny stock per transaction.

My conclusion? Futu MooMoo free commission platform is not a marketing gimmick, as the additional costs are all paid to the regulatory agency and they do not receive any. I will continue to use MooMoo as one of my main investing platforms. Of course, hopefully they will waive the platform fee permanently in the future after Futu manages to get more funds and grow bigger.

I received an email from the Tiger brokers that there will be a cap for the settlement fee, at 7% of the trade value. This would be a good news to Penny stock traders. I guess, Futu is going to adjust their settlement fee structure soon… too?? Many penny stock traders are also scalpers or short term traders. The broker is good to adjust the fee structure to cater them.

In my next Futu Moo Moo video, I will be sharing how to earn free money and shares through their platform. Please subscribe my channel HEREor follow this link: https://www.youtube.com/channel/UCXrx37FdB5C3Lby2m9R3HAQso you won't miss it.

Please like my video before you go. Thank you and see you in the next video.

Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only. Read more

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JM investor OP : if there is any information is wrong, moomoo modulators please feel free to let me know!

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MyHeadsAboveTheH2o : Great presentation.

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JM investor OP MyHeadsAboveTheH2o : thank you!

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Milk The Cow : That mean decrease one & increase another unnoticeable one ?

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JM investor OP Milk The Cow : increase which one lol

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Milk The Cow Milk The Cow : Nice noticing .
I never really bothered check that time when they mentioned the changed in SEC pricing because it's still considerably low... but a big differences for big investors (From $00000.51 to $0000.229 = Erm..., the zero has decreased by 1 )

Settlement fee, I think they made the changes already... =max 1%*Transaction/Trade.

Very sly +.
I guess is something similar to Singapore = tax on the rich .

But too bad this is a group thing & so other brokages will have the same result .
It's like a council in the group of brokages voting :
Moomoo: "Hey guys, we should increase the SEC fee this year, everyone agree?"
Others: "Yeah yeah, we should... = US government hike interest rate = & we should raise 'accordingly'+"
Me : ++ (Minor player)

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Milk The Cow JM investor OP : SEC fee.

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JM investor OP Milk The Cow : ah I see! thank for pointing out! I did not realize it too!

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Milk The Cow : The options platform fee also has a min. fee now ...
And I still haven't has the chance to use it in the past that has no min platform fee for options trading .

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Milk The Cow Milk The Cow : Also, the SEC fee has no max/Trade...
But there's a min/Trade .

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JM investor

learn investing in my YouTube channel at "JM investment journal"

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