Options for entering the US stock market for Russian trader

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Trading on US stock exchange

is available only to those who have capital of not less than 10 thousand dollars (in some cases the threshold may be 500-1000 US dollars, but such cases are rare). But access to US markets gives the investor great prospects:

  • the number of securities on US exchanges exceeds the number of shares, for example, on MICEX;

  • US bonds are more stable and have higher yields compared to corporate Russian bonds;

  • stock indexes are at highs and continue to grow, while the Russian market is going up much slower.

US exchanges are less subject to geopolitical factors and more predictable. But the problem is that US brokers are not particularly eager to work with Russian investors, since it is not practical from an economic point of view in the first place (a limited flow of capital). Without a broker to break into the American market is impossible, but the question is, which broker to choose – different fees, taxes, etc. can significantly affect the choice.

Trade on US exchange

There are three options to enter the American market, which we consider more detailed accounting of the advantages and disadvantages.

1.   Opening an account with a Russian broker

Domestic brokerage firms offer trade on NYSE and NASDAQ (this is enough to trade) through a single account from which the trade will be held by both Russian and US securities. Such service provides “Finam”, “BCS”, “freedom Finance” and a few brokers.

  • Important! With these accounts you can trade only the US securities listed on Russian exchanges, and it is only a little more than 60 papers (less than 1% of all stock exchanges of the USA).

Trade on US exchange is available only to qualified investors. Theoretically, this status can be obtained in the presence or diploma of higher economic education, or if you have experience in securities trading. In practice, this is not enough — only a deposit of 6 million opens the way to the US market.

The advantages of the option:

  • the Russian broker is responsible for taxation on the territory of the Russian Federation;

  • low entry threshold (from 30 thousand rubles), subject to the availability of the status of “qualified investor”;

  • fast account opening, and tax incentives for ISS.

Cons of option:

  • small number of available securities;

  • the costs of depositary services and the purchase of the trading platform;

  • many of the involved intermediaries (the Russian broker comes to US stock exchange, through the American sub-broker);

  • work of the broker in Russia is not insured. In the case of bankruptcy risks are carried by the trader. Licensed Russian brokers are specified in the lists on the website of the Central Bank of the Russian Federation or the Moscow exchange.

2.   Opening of subbrokers account

This option implies that, the trader will receive access to US exchanges through the Russian “daughter” of having an offshore jurisdiction. In other words, the trader does not open a personal brokerage account, and receives a virtual ground on the account of the offshore company, which opened at the American broker. The company, which provides brokerage services, does not apply to professional market participants and is essentially an intermediary between the trader and the US licensed broker.

The advantages of the option:

  • ease of opening an account in the theoretical understanding of this procedure;
  • receive access to all securities markets of the United States;
  • there is Russian-speaking support;
  • there is the possibility of working with derivatives.

Cons of option:

  • holder of the securities is a sub-broker, he receives dividends on the shares on which the trader has no right;
  • high commission costs and risks due to long chain of participants;
  • the need to solve issues with the payment of taxes;
  • the entry threshold — from 3 US dollars.

3.   Opening an account directly with US broker

Trading on the stock exchange of the United States through a direct broker is the best option due to the guarantee of reliability of the broker, low cost etc.

The advantages of the option:

  • access to all stock assets;
  • low commissions, no costs for the purchase of the trading platform;
  • insurance coverage in case of bankruptcy of the broker — 500 thousand US dollars;
  • the right to receive dividends; the ability to switch to another broker directly transferring the paper (i.e. without selling them).

Cons of option:

  • addressing the issue of dual taxation. Independent reporting in Russia;
  • high entry threshold (from 10 thousand dollars);
  • no Russian-language support.

Which option to choose — the question is individual. But trading on the US stock exchange is by far the more beneficial option in comparison with the Russian market. In the U.S. stock market more than 7 million securities are traded, representing about 40.6% of the world capitalization.

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