Home / Stock Trading / Fees and brokers’ commissions in the Philippine Stock Exchange

 
Stocks, Mutual Funds, Forex, Finance Philippines

In the past, we have written several tutorial articles related to Stocks and Stock Trading for the benefit of those interested to start investing in stocks. You probably have learned by now how much money is needed to invest in the stock market, how profits are made in stocks, and when is the best time to sell your stocks.

You have perhaps chosen your stock broker already. But before you make that first trade, make sure you are familiar with fees and charges related to stock transactions so you won’t end up with a loss even if you sold your stock at a price higher than your acquisition cost.

Here are the stock transaction fees in the Philippines. A lot of things have changed in the past couple of years so take note of the new fee structure below. Source of the following is the Philippine Stock Exchange website and it shows that the same fees are now charged to both buyers and sellers.

Explanation of Stock Fees, Taxes and Charges

Brokerage commission. You use a broker, regardless if a live broker or online broker, to help facilitate the buying and selling of stocks. They make money from the commissions charged on your every trade. Remember, the more trades you do with them — even if the transaction is to sell at a loss — they get to earn commissions from the trade. So be wary if they keep on telling you to trade, even if you’re not comfortable with the transaction. Broker’s commission vary per broker, but the maximum rate they can charge is 1.5% of the transaction amount, or a fixed minimum fee of P20, whichever is higher. The transaction is also charged an additional 12% VAT.

SCCP or Clearing Fee. When you buy a stock, you pay money and, in return, you get ownership of that stock. There is an agency that facilitates proper stock clearing and settlement. In simple terms, they ensure that your payment as buyer goes to the seller of the stock and the stock is properly transferred to your name. This agency is the “Securities Clearing Corporation of the Philippines” or the SCCP, a wholly-owned subsidiary of the Philippine Stock Exchange Inc. Their role is to synchronize the transfer of funds and securities to the beneficial owner. The stock seller, through their broker, must deliver the securities to the SCCP and, once the securities are properly transferred, the SCCP transfers funds to them as payment for the sale. For the work that they do, they charge 0.01% of the transaction amount.

PSE Transaction Fee. The Philippine Stock Exchange charges 0.005% of the gross trade amount for every stock transaction.

Stock Transaction or Sales Tax. The government, of course, earns money too from stock trading transactions by charging 0.5% whenever a stock selling transaction is made. Take note this tax is charged even if the transaction resulted in a loss.

Computation of Fees for a Sample Buying Transaction 

Stocks, Mutual Funds, Forex, Finance Philippines

Here is an example of how much you need to pay if you are to buy stocks on the Philippine Stock Exchange.

Let’s assume you want to buy 10 shares of PLDT (Stock Code: TEL) at a price of P2,500. Let’s also assume, for this example, that the broker’s fee is 0.25% — similar to what most online stockbrokers in the Philippines are charging.

  • Gross Transaction Amount: 10 shares * P2,500 share price = P25,000.00
  • Add: Broker’s Commission: 0.25% * P25,000 = P62.50
  • Add: VAT on Broker’s Commission: 12% * P62.50 = P7.50
  • Add: SCCP Fee: P25,000 * 0.01% = P2.50
  • Add: PSE Transaction Fee: 0.005% * P25,000 = P1.25
  • TOTAL BUYING TRANSACTION COST: P25,073.75

Thus, to buy 10 shares of PLDT shares at P2,500 share price, one has to shell out a total of P25,073.75.

Computation of Fees for a Sample Selling Transaction 

If you are to sell stocks, you will be paying the same fees above, plus the 0.5% stock transaction or sales tax. Let’s assume the same numbers above (sell TEL shares at P2,500, with the same broker’s commission rate of 0.25%):

  • Gross Transaction Amount: 10 shares * P2,500 share price = P25,000.00
  • Less: Broker’s Commission: 0.25% * P25,000 = P62.50
  • Less: VAT on Broker’s Commission: 12% * P62.50 = P7.50
  • Less:SCCP Fee: P25,000 * 0.01% = P2.50
  • Less: PSE Transaction Fee: 0.005% * P25,000 = P1.25
  • Less: Stock Transaction Tax: 0.5% * P25,000 = P125.00
  • TOTAL PROCEEDS FROM SELLING TRANSACTION: P24,801.25

Your net proceeds then for a stock selling transaction is P24,801.25 [computed as P25,000 gross proceeds - P198.75 fees and charges].

Price Increase Breakeven Point

Thus, before selling your stock, make sure your selling price incorporates not just your acquisition cost but also the fees and charges paid when you bought the stock and other fees you will have to pay once you sell it. Otherwise, even if you sold your stock at a slightly higher price than your original price, it is possible that you actually might have booked a loss, instead of a gain.

So at what price or how much should your stock rise before you sell it to be assured of profit?

The breakeven point would vary depending on the broker’s rate of commission but for a 0.25% commission, your stock  price needs to rise above 1.09% in order to book a profit. That means the stock price, compared to your acquisition price, should increase by at least 1.09% before you sell it so that you will make money.

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commission rates for securities brokers, what is sccp pse fee



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