Saturday, November 07, 2009

Fidelity Helps Investors Shop Abroad

FIDELITY HAS JUST LAUNCHED A NEW, online international-trading center for customers, with the goal of making investing in foreign equities and currencies easier and more affordable. Retail investors can execute trades in a dozen foreign markets and eight currencies from their Fidelity brokerage accounts.

The 12 markets—Australia, Belgium, Canada, France, Germany, Hong Kong, Italy, Japan, Netherlands, Norway, Portugal and the United Kingdom—represent 95% of current Fidelity clients’ international trades, which until now had to be executed through a live broker. Customers will be able to settle their trades in eight currencies: the Australian dollar, British pound, Canadian dollar, euro, Hong Kong dollar, Japanese yen, Norwegian krone and the U.S. dollar.

One interesting twist to the Fidelity platform ( is the ability to settle trades, no matter where they occur, in U.S. dollars. This eliminates the added step of having to exchange currencies prior to placing a trade. Fidelity will perform a currency exchange so long as the trade goes through in the exact amount required; if the order isn’t filled, the currency exchange won’t happen.

Trading in international markets obviously isn’t a new idea, but when a broker the size of Fidelity enables retail investors to participate online, it shows how widely accepted foreign investing is.

James C. Burton, president of Fidelity’s retail-brokerage arm, notes, “When you consider that over the last 10 years, 80% of the world’s best-performing stocks were listed outside the U.S., it is understandable why investors are increasing their focus on international investing.”

To be eligible to trade internationally, you must hold a nonretirement account and qualify for Fidelity’s gold-level commission. Gold-level customers are those who either trade at least 120 times per year and have at least $25,000 in a Fidelity account, or have $1 million or more in household assets held at Fidelity.

Fidelity just raised the suggested level of exposure to international equities to 30% from 20% of a portfolio (see Barron’s, “Fidelity Shifts Its Assets Allocation,” Oct. 12). This new weighting will be reflected across Fidelity’s online-advice and guidance tools, including asset-allocation portfolios and managed accounts, as well as the Freedom Fund product lines. (Freedom Funds are target-date mutual funds.)

If you are eligible for international trading, your first step probably would be to explore the research available at Fidelity. You can get real-time quotes when international markets are open. Most common stocks and exchange-traded funds (ETFs) are available to trade online, while other types of securities (rights, warrants, Class A or Class B stock) might not be.

FINDING A STOCK SYMBOL allows you to get a real-time quote; when you look up a symbol, you will also see the various countries where you can trade. Note that once you buy a stock on an exchange, you have to sell it there, too, even if the shares trade on several bourses. The symbol look-up also shows 10-day average volume, which should help you locate the markets where there is more action.

To trade, you have to have enough U.S. dollars on hand (displayed as cash available to buy securities) or the foreign currency needed to place the order. For instance, if you’re buying a stock that trades in the U.K., you will need to have enough pounds sterling in your account prior to placing the transaction, or enough U.S. dollars if the trade is settling in dollars. Once you’ve placed your orders, either for stocks or for foreign currency, they’ll be displayed on your “Open Orders” page; once they’ve gone through, you can see your international holdings on your “Positions” page.

International exchanges have some restrictions that may seem—pardon the pun—foreign to investors who are most familiar with U.S. exchanges. Most markets have a tick-size requirement (meaning a price has to move a certain minimum amount before the stock price will display as having changed), as well as a lot-size requirement (a minimum number of shares); these are all detailed on the Fidelity site. Fidelity has live help available 24/7, with specialists who can walk you through the complexities.

Your international returns will depend on two factors: the usual market volatility that affects every stock, plus the fluctuations in the foreign currency against the U.S. dollar. Fidelity doesn’t pay interest on foreign-currency positions.

You will also have to keep commissions in mind; each foreign market has a different rate. For example, trading an Australian stock online will cost A$32, which is roughly US$28.90. A trade in Japan is 3,000 yen, or about US$32.90. Euro trades run €19, or about US$28.10. There are added charges for placing a trade with a live broker.

If you aren’t ready for international-equity trading, Fidelity has a mutual-fund and ETF evaluator that focuses on other types of foreign-investment approaches; please see the Website noted above.

The entire site reflects the firm’s emphasis on international trading. Fidelity’s “Markets and Sectors Overview” page now displays a world map, showing changes in indexes not only in the U.S. but globally. You can customize the indexes displayed by clicking on “More U.S. & World Indexes” just beneath the map.

Overall, this appears to be a good way for a U.S.-centric investor to look further afield for opportunities. Fidelity customers can get it all done without having to open a new account, unlike E*Trade’s international-investing feature. The interface is easier to use than that of Interactive Brokers, but the cost is higher.

and Tulane University are holding a trading contest that will wrap up with a live competition Nov. 13-14 at the Freeman School of Business at Tulane in New Orleans.

Twenty-two teams of four from 14 universities competed Oct. 12-23 using Trading Technologies’ software and live-data feeds from Advantage Futures. Teams from Tulane, the University of Chicago, Carnegie Mellon University, the University of Texas and the University of Toronto qualified for the final round.

Trading Technologies specializes in futures-trading. X_Trader, its flagship product, offers access to U.S. and global commodities exchanges, with links to Excel-spreadsheet analytics. The students’ performance is judged on risk-adjusted rate of return. Top prizes include internships with a leading trading firm. Good luck!

Published in Barron’s, November 2, 2009. 

Posted by twcarey on 11/07 at 01:16 AM
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