CDP vs Custodian Account: Which is a Better Option For Singapore Investors?
Last Updated on 4 weeks ago by Antony C.
When you are looking to invest in Singapore, you may have come across CDP account and a Custodian account. In Singapore, we have many brokerage options, some with trading Apps, others offers low commission fees, and access to different market such as US and China on top of Singapore listed stocks(SGX).
However, knowing the difference between Brokerage with CDP Account or Brokerage with Custodian Account can help you save a lot of trading fees and protect your investments.
KEY TAKEAWAYS
- Central Depository (CDP) account let you credited to your stocks into your CDP account, establishing direct ownership with voting rights.
- Custodian account is a financial account held by a financial institution or brokerage to help you safekeep your stocks, bonds, and mutual funds, often offering lower fees, and easier management.
- CDP account is only applicable to SGX listed stocks, a custodian account can hold SGX, NYSE, HKEX, SSE, and many other exchange listed stocks.
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CDP Accounts in Singapore Explained
When it comes to handling investments in the Singapore market, knowing about CDP accounts can enhance your trading experience.
What Is a CDP Account?
A Central Depository (CDP) account, operated by SGX (Singapore Exchange), is where your securities such as stocks or bonds are held. When you buy shares, they are credited to your CDP account, establishing direct ownership with voting rights during Annual General Meetings and other shareholder rights.
Having a CDP account is akin to a safety vault for your securities in the Singapore market.
Pros and Cons of a CDP Account
The following table outlines the advantages and disadvantages of having a CDP account:
| Pros of CDP Account | Cons of CDP Account |
|---|---|
| Direct Ownership: You have direct ownership of your securities, meaning they are registered under your name. | Privacy: Your ownership is public, which means less privacy compared to a custodian account. |
| Voting Rights: As a shareholder, you can exercise voting rights at Annual General Meetings. | Fees and Charges: There may be fees associated with maintaining a CDP account. |
| Dividend Payments: Dividends are paid directly to you, ensuring you receive full entitlement. | Singapore Market: CDP account is only limited to SGX-Listed stocks, you cannot hold stocks listed on other exchanges. |
Remember, while a CDP account gives you full control over your securities, consider the fees and charges, and the lack of privacy in comparison to custodian accounts. Your choice should align with your investment style and preference for control over your securities.
Custodian Accounts in Singapore Explained
When you’re deciding on how to manage your investments in Singapore, understanding custodian accounts is crucial for informed decision-making.
What Is a Custodian Account in Singapore?
A custodian account in Singapore is a type of financial account held by a financial institution or brokerage on your behalf. It’s where your securities, such as stocks, bonds, and mutual funds, are held for safekeeping.
Banks or brokerages that offer these services act as custodians to ensure the security and proper administration of these assets.
Pros and Cons of a Custodial Account
The choice between a Central Depository (CDP) account and a custodian account can significantly impact your investment experience. To highlight the differences, here’s a comparative table:
| Pros of a Custodian Account | Cons of a Custodian Account |
|---|---|
| Lower Fees: Often, the custody fee may be waived if you meet certain criteria with the financial institution. | Special Fees: Custodian accounts typically come with a custody fee for the management and safekeeping of securities. |
| Privacy Protection: Your securities are held in the custodian’s name, offering an extra layer of privacy protection. | Disconnection: Sometimes, this privacy can create a sense of disconnection from the direct ownership of your assets. |
| Wide Market Access: You can access a wide range of foreign securities not available through a CDP account. | Less Control: There may be less direct control of your investments compared to holding them in a CDP account. |
| Easy Dividend Management: The custodian manages dividend payouts, which can be convenient for you. | Clearance Fees: Custodians may charge fees for the distribution of dividends. |
Being aware of both the advantages and potential drawbacks of custodian accounts enables you to make informed decisions based on your investment needs, preferences for privacy, appetite for a variety of securities, and sensitivity to fees.
Comparing the Difference Between a CDP and a Custodian Account
In Singapore, you’re likely to encounter two main types of accounts for holding your investments—CDP accounts and custodian accounts.
Knowing their differences is crucial for making informed investment decisions.
| CDP Account | Custodian Account |
|---|---|
| Own assets under your name | Assets held in the broker’s name |
| Directly receive corporate actions that requires you to take actions when neccessary | Corporate actions facilitated by broker, you will be informed if you need to take any actions. |
| No custody fees for SGX-Listed stocks | Custody fees may apply for some broker |
| Only applicable to SGX-listed stocks | Can hold stocks from wide selections of exchanges. |
| Higher trading and commission fees (Can be as much as 4 times more than custodian account)) | Lower trading fees comparatively (Some brokers offers $0 commission fees) |
| No transfer fee to transfer shares to another account | Transfer fee might be charged when transfer to another broker |
Why Choose Central Depository (CDP) Account?
A CDP account is an account you hold directly with the Singapore Exchange (SGX). When you own Singapore stocks in a CDP account, you hold legal ownership, meaning the shares are registered in your name.
Custodian accounts, on the other hand, hold your assets in the name of the brokerage or a custodian. While you’re the beneficial owner, the legal title is held by the custodian, which can affect how quickly you might receive dividends or corporate action notices.
In terms of accessibility, your Singapore stocks in a CDP account are easy to access, and transferring shares to another account incurs no fee. (But I can’t think of the reason why you want to do that, unless you want to switch broker, this is quite useless.)
Why Choose Custodian Account For Investing in Singapore?
When comparing fees, while a CDP account often does not carry a custody fee, the brokerage fees, commission fees and other clearance fees are always much higher.
- CDP Account Example: DBS Vicker’s commission fee of 0.12% Trade Value.
- Custodian Account Example: Moomoo Singapore’s commission fee of 0.03% Trade Value.
Trading fees are typically lower through a custodian account, which can be more cost-effective if you trade frequently. Here is a quick comparison table on the fees.
| BROKERAGE | MIN. FEES (SGD) | TRADING COMMISSIONS (SGD) | ACCOUNT TYPE | CUSTODIAN FEES (SGD) |
|---|---|---|---|---|
 Moomoo Singapore | $0.99 | 0.03% Trade Value | Custodian or CDP-Linked | No custodian fees |
 Longbridge Singapore | $0.99 | 0.03% Trade Value | Custodian | No custodian fees |
 Tiger Brokers | $0.99 | 0.03% Trade Value | Custodian | No custodian fees |
 Phillip Securities | $25.00 | 0.08% Trade Value | Custodian | $15 Per Quarter |
 KGI Securities | $25.00 | 0.18% Trade Value | Custodian | $2.14 Per Quarter |
 Lim & Tan Securities | $25.00 | 0.18% Trade Value | Custodian | $15 Per Quarter or 0.0025% pa of Market Value of Share |
 iFAST Financial | $8.80 | 0.08% Trade Value | Custodian | No custodian fees |
 Maybank Kim Eng Securities | $25.00 | 0.275% Trade Value | CDP | Not Applicable |
 DBS Vickers | $25.00 | 0.12% Trade Value | CDP | Not Applicable |
 UOB Kay Hian | $25.00 | 0.18% Trade Value | CDP | Not Applicable |
 OCBC Securities | $25.00 | 0.275% Trade Value | CDP | Not Applicable |
 CGS-CIMB Securities | $25.00 | 0.18% Trade Value | CDP | Not Applicable |
Another key reason that a custodian account can be more beneficial is that it offers you the option to invest internationally and not limit yourself to just in the SGX-Listed stocks. This mean you can invest in popular stock exchange such as:
- Singapore: SGX
- United States: NYSE and Nasdaq
- China: SSE and SZSE
- Hong Kong: HKEX
- Others
Understanding these key differences helps you evaluate which account aligns with your investment strategy, be it for frequent trading where lower fees are paramount or for direct ownership where corporate action and voting rights might be a priority.
Investment Considerations and Best Practices
When selecting between a Central Depository (CDP) account or a Custodian account for trading on the Singapore Exchange (SGX), you must assess several key factors. Here is a comparative overview:
| Feature | CDP Account | Custodian Account |
|---|---|---|
| Ownership | Direct ownership of stocks | Held by a third party |
| Fees | Lower long-term fees | Potentially lower total fees |
| Accessibility | Specific to SGX-listed shares | Access to both local (SG) and foreign markets, such as US, CN, HK stocks |
| Consolidation | Separate from your brokerage account | Integrated with your brokerage services for easy management |
Brokerage fees play a crucial role in your investment strategy and can impact your returns. Be aware of the trading fee and clearing fee associated with transactions in your chosen account.
- Low cost brokerages like Moomoo, Longbridge or Webull offer services including access to both local and global stock exchange together with market insights and investing tools for easy-to-use investment experience.
- Other specialized brokerages like Syfe and Endowus offer robo-advisors service for a more automated investment experience but at the cost of much higher fees.
For a long-term investment horizon, maintaining a diverse portfolio that includes both local and foreign-listed securities is crucial. Always look at your own investment goals and understand your own needs.
Ultimately, the best brokerage accounts in Singapore are those that offer a balance between cost-effectiveness and the flexibility to meet your individual investment needs.
Remember, when you open your brokerage account for investing, your decisions should align with your financial objectives and risk tolerance.
CDP vs Custodian Account Comparison Chart
| CDP Account | Custodian Account |
|---|---|
| Holds shares in your name | Holds shares in the name of the brokerage |
| Higher fees | Lower fees |
| Full control and rights over your securities | Brokerage has control, with investor rights maintained |
As an investor and trader, choosing between a CDP account and a custodian account comes down to your own personal preference.
- Custodian: If lower fees are a priority and you are investing with a trusted brokerage where it helps to holding your assets on behalf of you, a custodian account may be better for you.
- CDP-Linked: If you will like to have direct ownership of your securities, and you are ok with spending time to management your account, a CDP account is the appropriate choice.
Personally, I have both a custodian account and a CDP-linked account, and I think both have their strength and weakness.
How I Choose Between CDP vs Custodian Account?
For me, fees is the most important consideration.
I personally use low fee brokerage platform like Moomoo for most of my investment because it is not low fees of just 0.03% trade value when investing in Singapore and Hong Kong stocks, it offer $0 commission fee for US Stocks, which is pretty amazing.
- Low fees for trading stocks
- User-friendly platform interface
- Local and international market exposure
For me, Moomoo meets all of my investment needs, and if you want to know more, go check it out and see for yourself.
(PS. Currently, they are offering new sign-up promotion which is for limited time only, click the link and have a look yourself.)
- Claim up to S$1,200* worth of Free Stocks + Trading Option Gifts + Exclusive Bonus.
- Earn a return on idle cash with Moomoo Cash Plus
- Low commission fee for SG & HK stocks, ETFs & options.
- Lifetime $0 commission free* for US stocks.
Moomoo Promo: Low Commission + Free Stock
Frequently Asked Questions (FAQs) on CDP and Custodian Account
Here, you’ll find answers to common questions about Central Depository (CDP) accounts and custodian accounts, assisting you in making informed decisions for your investments in Singapore.
Disclaimer: I am not your financial adviser or lawyer, information found on our website is just our opinions, and should be used for entertainment purposes only. You should always ask your financial adviser or lawyer for any financial or law-related advice. By accessing this website you’ve agree on our T&C.
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Antony C. is a Singaporean dividend investor focused on building passive income through REITs, ETFs, and Dividend Stocks. With 15+ years of experience investing in Singapore, Hong Kong, and China markets, he founded IncomeBuddies.com to share practical wealth-building strategies tested in his own portfolio since 2008. His expertise has been featured in Yahoo Finance, Nasdaq, and NFAA, and he’s the published book author of "Start Small, Dream Big".