Do bid-ask spreads on ETFs differ between platforms?
Posted: March 12th, 2024, 9:59 am
This seems like something I should probably know. But I'm a bit gobsmacked by a purchase I just made.
I have recently acquired some pretty big funds due to an inheritance and some of this at least is being put into GIA accounts.
Over recent weeks, making reference above all to the Monevator broker comparison page (https://monevator.com/compare-uk-cheapest-online-brokers/), but also threads here, I have now opened 4 new GIA accounts: at Charles Schwab, InvestEngine, Trading212 and, just this morning, Hargreaves Lansdown. The Charles Schwab account was opened in the mistaken belief that I'd be able to buy ETFs with ISIN starting "US ...". As detailed in previous threads I've now realised how naive that was! I intend to close this.
The InvestEngine and Trading212 a/cs were opened because these appear to be free purchase platforms: no annual charge, no transaction charge, amazing. I've googled a bit to find how they actually make money, whether they're "scams", etc. I have some doubts still about both: InvestEngine reportedly sometimes take a very long time to actually "settle" transactions. Trading212 apparently stopped accepting new accounts for about a year not so long ago, and their central "hub" or whatever is based in Bulgaria of all places. OTOH both the UK trading entities are obviously regulated by the FCA. But as at this writing, some doubts certainly linger.
Anyway, this morning, having learnt some time ago that Hargreaves Lansdown GIAs now don't have an annual charge if you avoid funds (OIECs I mean), but stick to ETFs and/or shares, I opened a GIA there and bought £60k of a global index tracker. Transaction charge £11.95, which is fine, given this is a long-term thing. The advantage of HL being that I have no doubts at all about HL's legitimacy.
However I then saw that the purchase had immediately "lost" something like £100 in value! It turns out that this is due to the bid-ask spread practised at HL. So I then went to Trading212 and initiated first a SELL and then a PURCHASE for a given ETF I hold. They don't appear to practise ANY bid-ask spread.
Is this common knowledge? Have I got something wrong about the Trading212 spread practice? I'm very surprised this is not detailed in the above Monevator platform comparison page: surely this is a very relevant aspect of comparison.
Before today I think I had assumed that all platforms would practise pretty much the same spread.
I have recently acquired some pretty big funds due to an inheritance and some of this at least is being put into GIA accounts.
Over recent weeks, making reference above all to the Monevator broker comparison page (https://monevator.com/compare-uk-cheapest-online-brokers/), but also threads here, I have now opened 4 new GIA accounts: at Charles Schwab, InvestEngine, Trading212 and, just this morning, Hargreaves Lansdown. The Charles Schwab account was opened in the mistaken belief that I'd be able to buy ETFs with ISIN starting "US ...". As detailed in previous threads I've now realised how naive that was! I intend to close this.
The InvestEngine and Trading212 a/cs were opened because these appear to be free purchase platforms: no annual charge, no transaction charge, amazing. I've googled a bit to find how they actually make money, whether they're "scams", etc. I have some doubts still about both: InvestEngine reportedly sometimes take a very long time to actually "settle" transactions. Trading212 apparently stopped accepting new accounts for about a year not so long ago, and their central "hub" or whatever is based in Bulgaria of all places. OTOH both the UK trading entities are obviously regulated by the FCA. But as at this writing, some doubts certainly linger.
Anyway, this morning, having learnt some time ago that Hargreaves Lansdown GIAs now don't have an annual charge if you avoid funds (OIECs I mean), but stick to ETFs and/or shares, I opened a GIA there and bought £60k of a global index tracker. Transaction charge £11.95, which is fine, given this is a long-term thing. The advantage of HL being that I have no doubts at all about HL's legitimacy.
However I then saw that the purchase had immediately "lost" something like £100 in value! It turns out that this is due to the bid-ask spread practised at HL. So I then went to Trading212 and initiated first a SELL and then a PURCHASE for a given ETF I hold. They don't appear to practise ANY bid-ask spread.
Is this common knowledge? Have I got something wrong about the Trading212 spread practice? I'm very surprised this is not detailed in the above Monevator platform comparison page: surely this is a very relevant aspect of comparison.
Before today I think I had assumed that all platforms would practise pretty much the same spread.