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Created on 09.08.2018

What are sponsored trades?

Trading on the stock exchange always involves costs: anyone who buys and sells securities on the stock exchange pays various fees to the bank, the tax authorities and the stock exchange. Sponsored trades offer investors the opportunity to benefit from lower brokerage fees when buying or selling selected products.

Brokerage fees, stamp duties and stock exchange fees – anyone who trades on the stock exchange will no doubt have already heard these three terms. After all, these fees must be paid virtually every time securities are bought or sold.

  • Stamp duty is a tax levied by the Swiss tax authorities on almost every trade on the Swiss financial center. The amount is set by the Federal Tax Administration and indicated as a percentage of the sum generated by the securities trade. The amount of stamp duty depends on whether the stock exchange is in Switzerland or abroad and whether the trade involves a Swiss or a foreign security.
  • Stock exchange fees are paid to the stock exchange for making the trade possible in the first place.
  • In addition, brokerage fees must be paid to the bank responsible for executing the trade. Their amount varies from one provider to another, and is based principally on the order volume, price and stock exchange concerned.

Depending on the bank, other fees may also be due, for instance for custody account management. Our article “Get to grips with the minefield of charges” will help you to understand the costs associated with investments.

Sponsored trades: more cost-effective brokerage fees

While stamp duty and stock exchange fees are regulated by the Confederation and the stock exchanges, brokerage fees are different: each bank uses its own models for fixing its brokerage fees – or may even offer discounted brokerage fees. These discounted brokerage fees may be called “sponsored trades”, for instance. Anyone who takes advantage of sponsored trades will therefore pay lower brokerage fees. The difference in relation to regular brokerage fees is generally borne by the issuer. Investors either receive a discount as a percentage (e.g. 25%) on the regular brokerage fees, or benefit from a flat fee. This means that they pay a set price, regardless of the order volume (e.g. a flat fee of CHF 15).

For selected products

The bank and issuer together decide when to offer sponsored trades: investors can only benefit from discounted brokerage fees when trading specific products. Selected ETFs and structured products are some of them. Sponsored trades always apply to trade orders on pre-defined stock exchanges. Consequently, you may be able to reduce your transaction fees and benefit from sponsored trades depending on the product you have chosen.

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