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Buying US Shares

What are the technicalities of buying and selling US shares?

Buying and Selling U.S. shares is the same as buying and selling Australian shares. You simply instruct your broker what you want to do, either using their online trading platform or website or by calling them and speaking to a representative.

Usually, the U.S. market doesn’t need to be open for you to place an order, but you’ll need to check with your broker on how they’ll route your order. Some brokers implement unusual rules around when and what type of order you can place.

Australia now has two viable exchanges that your order could be routed to, whereas the U.S. has dozens. This means that the share you want to buy could also be trading on several different exchanges at the same time. There might also be slight price variations between exchanges and different rules around the type of order you can place.

With the same stock trading on multiple exchanges, it becomes difficult to discern what the actual stock price is because it depends on which exchange you ask. To combat this, the United States Securities and Exchange Commission developed the National Best Bid and Offer (NBBO) regulation. This looks at the various exchanges and finds the highest bid and lowest offer and considers that as the price for the stock.

SMART Routing
Capital 19 makes use of a clever piece of technology called SMART routing. This system checks your order and the prices on each exchange and then routes your order through to whichever exchange will get you the best price. SMART routing has been proven to get better prices than even the NBBO by up to 0.06 cents per share[1], ensuring you always get the best possible prices for your orders.

 

1 Interactive Brokers

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This is an excerpt from the book ‘An Australian’s Guide To Investing In U.S. Stocks‘ by Matthew Jones.

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Disclaimer: Capital 19 Pty Ltd ABN 17 124 264 366 AFSL 441891 (‘Capital 19’) believes the information contained is reliable, however, no warranty is given as to its accuracy and persons relying on this information do so at their own risk. This communication is for general information only and was prepared for multiple distributions and does not take account of the specific investment objectives of individual recipients and it may not be appropriate in all circumstances. Persons relying on this information should do so considering their specific investment objectives and financial situations. Any person considering action based on this communication must seek individual advice relevant to their circumstances and investment objectives. Subject to any liability which cannot be excluded under the relevant laws. Any opinions or forecasts reflect the judgment and assumptions of Capital 19 and its representatives based on information at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future. The investment manager certifies that all the views expressed in this document accurately reflect their views about the companies and securities referred to in this document and that their remuneration is not directly or indirectly related to the views. Capital 19, its directors, representatives, employees or related parties may have an interest in any of the companies and securities in this document and may earn revenue from the sale or purchase of any financial product referred to in this document or any advice. Past performance is not a reliable indicator of future performance. Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this document is prohibited without obtaining prior written permission from Capital 19.
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