What to consider before you trade
Foreign securities transactions may present higher risks and entail higher costs than domestic securities transactions.
Operational Differences
- Many foreign markets operate differently from those in the U.S. They may have varying trade rules that prescribe lot sizes, trade limits, or ticks, that can dictate or limit the number of shares purchased in a given transaction.
- Settlement cycles may differ from the standard for U.S. exchanges. For additional information on settlement cycles, please review Equity & Currency Trade Settlement Cycles in Foreign Markets.
- General accounting rules and regulatory reporting requirements can vary by country and differ from U.S. standards.
Additional Costs
- Foreign transactions incur additional custody, clearing, and settlement expenses, so processing costs are higher than the same costs for domestic stocks.
- Foreign markets may also impose additional taxes, special fees, and other levies not encountered in the U.S. For additional details, please review Charles Schwab’s Pricing Guide for Individual Investors (“Pricing Guide”).
Risks
- Factors such as legal and operational differences, local politics, and geopolitical conditions can affect the prices of foreign securities.
- If the currency of your investment falls relative to the U.S. dollar, it can lower your overall return.
- Liquidity can vary widely, which can cause prices to fluctuate greatly. Investors interested in trading foreign stocks may find greater liquidity and better prices by trading on foreign stock exchanges vs. the U.S. OTC market.
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