Milette S.

Caliwan BFN-B3E

M5: Assignment 1

1. Who can invest in stocks?

All Filipinos (including OFWs) and foreigners 18 years old and above can invest in the
Philippine Stock Exchange. Minors or children below 18 years old may participate in the stock
market through an In Trust For (ITF) account, which should be opened for them by their parents
or guardians. In this case, stock investing is ideal for building a child’s college tuition fund.

2. What is a board lot? Explain how to use the board lot.

Board Lot - A board lot is a standardized number of shares defined by a stock exchange

as a trading unit. In most cases, this means 100 shares. At some trading venues, the board lot
equals more than 100 shares. For example, the board lot size at the Hong Kong Exchanges and
Clearing Limited was changed from 8,000 shares to 24,000 shares in Feb. 2019.

For example, a stock exchange might define one board lot as equaling 1,000 shares for
stock priced under $1, and 100 shares for shares of more than $1. The thinking is
that standardization increases liquidity thus lowering spreads and making the market more
efficient for everybody.

Unlike the U.S., where board lot sizes are standardized to 100 shares, the Toronto Stock
Exchange (TSX) has variable board lot sizes that are dependent on the price of the security.
They are defined in the Universal Market Integrity Rules (UMIR) that govern trading practices in
Canada. The guidelines are as follows: trading price per unit is less than $0.10—board lot size is
1,000 units. Trading price per unit is $0.10 to $0.99—board lot size is 500 units. Trading price
per unit is $1.00 or more—board lot size is 100 units.

3.  What are the charges and fees that will be incurred in the buying and selling stock
transactions?

      Explain briefly.
 Brokerage commission fee
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.
  Sales Tax
Charged only to sellers of stocks, the sales tax is 0.5% of the gross sales amount.
Take note that this tax is charged even if the transaction resulted in a loss for the seller.
 Stamp Duty
When it comes to Stamp Duty charges, these are incurred by buyers but not
sellers. If you buy shares electronically, you'll pay the Stamp Duty Reserve Tax (SDRT) at
0.5% on the transaction.

https://www.moneymax.ph/personal-finance/articles/stock-investing-guide

https://www.investopedia.com/terms/b/boardlot.asp

https://www.pinoymoneytalk.com/stock-trading-costs-fees/

https://www.barclays.co.uk/smart-investor/investments-explained/shares/totting-up-the-costs-of-
buying-and-selling-shares/