What is an international stock broker?
An international stock broker is a broker based in the United States that allows customers to buy and sell stocks directly on foreign stock exchanges. Just to name a few common examples, international stock brokers often let customers trade in markets such as:
- Hong Kong
This is not to be confused with foreign stock trading, or foreign ordinary share trading. This refers to stocks that list on a foreign exchange, but also trade on the over-the-counter (OTC) market through U.S. brokers. Examples of foreign ordinaries that trade over-the-counter in the U.S. are Samsung, Nissan, and Nestle, just to name a few of this type of stock.
Some brokers allow for international stock trading within an ordinary brokerage account. Others require customers to open a separate account to place trades on foreign markets. Some require funds to be converted into local currencies before trading. Others do it automatically as part of the transaction. Some brokers allow international stock trading in many types of accounts. Others restrict it to non-retirement accounts only.
What’s more, some have actual international trading. Others (E-Trade, for example) will allow customers to call and specifically request a foreign stock purchase, but don’t have a dedicated online platform for global trading.
How to choose the best international trading platform
The short answer is that there’s no one-size-fits-all best online broker to trade stocks internationally that works for everyone. It depends on what features matter most to you. To help start your search for the best brokers for international trading, here are a few questions to ask yourself:
- Do you plan to be an active trader of international stocks? If so, you may want a broker with a sophisticated trading platform.
- Are you an experienced international stock investor? If you aren’t, things like tutorials and educational features from online brokers may be important to you.
- Do you plan to use margin to buy stocks? Not all brokers allow this with international stocks.
- What is more important? Keeping commissions and fees at a minimum, or having a broker with tons of educational research and other features?
- Do you want to buy international stocks in a retirement account like a traditional or Roth IRA? Not all brokers offer this.
The best course of action is to check out our list of top international stock brokers, and then read the individual reviews of each one to get a feel for the trading platform, costs, and features that may matter to you. It’s also worth noting that most brokers will allow you to “test drive” the platform with a play money trading account. So if you’re worried that a particular trading platform might be a bit too complex for you, it may be possible to test it out without putting any real money at risk.
How do I buy stocks internationally?
The exact process for entering orders varies by broker, but the general procedure is:
- Find an online broker that allows online trading on international stock exchanges. Be sure to check that any specific international markets you’re interested in are available. Some offer a relatively small selection of international stock exchanges to choose from, while others have a list of dozens of international markets that are available.
- Open a brokerage account. Check the brokerage’s website for the specific account opening procedures.
- Fund your account. Depending on your broker’s system, you may need to convert your U.S. dollars into the local currency of whatever stock exchange you wish to trade on.
- Do your research and buy your international shares.
It’s also worth noting that many brokers have rules specifically for international trading (such as margin requirements), and many foreign stock markets have their own rules that may apply.
What fees are associated with international stock trading?
While most brokers have done away with commissions on online stock trading, that typically only applies to stocks that trade on major U.S. exchanges — NYSE, NASDAQ, OTC. And as we’ve mentioned, there are quite a few international stocks that trade on all of these — for example, you can buy stock in non-U.S. food conglomerate Nestle on the OTC exchange with no need to open an international brokerage account.
That said, there are thousands of stocks you can only buy on their home exchanges or on other exchanges around the world. And if you buy or sell stocks on international exchanges, you should expect to pay a trading commission for the service.
Some brokers (Interactive Brokers is one of them) charge foreign-trading commissions based on a percentage of the trade amount. For example, to trade in Australia, investors with less than $3 million in monthly volume will pay 0.08% of each trade value in commissions. In other cases, the commissions are denominated in local currencies, so they may change over time. As one example, Schwab currently charges £9 for trades on U.K.-based exchanges. As of early May 2022, this translates to about $11.25 per trade in U.S. dollars, but exchange rates fluctuate constantly. So, not only should you expect to pay a commission, but your trading commissions won’t be the same for every trade.
You might also have to pay foreign currency conversion fees. After all, if you’re buying stock on a foreign exchange, you need to do so in the exchange’s local currency. It is reasonable to expect a fee of 0.20%-1% for converting your currency through a broker.
Do all stock brokers allow international trading?
The short answer is “kind of.”
All of the best stock brokers allow investors to buy shares of non-U.S. companies, as long as their shares are listed on U.S. exchanges. For example, Shopify is listed on the NYSE even though it is based in Canada. MercadoLibre trades on the Nasdaq but is based in Argentina. And payment giant Adyen trades as an American Depository Receipt (ADR) on the over-the-counter markets in the United States, as do Samsung and Nestle.
However, surprisingly few brokers allow their customers to invest directly on foreign stock exchanges. And some that used to — E*Trade for example — no longer offer the service. So, if you want to buy shares of foreign companies that don’t trade anywhere on the U.S. exchanges, your options may be rather limited.