Buying USD-based ETFs in CHF – I don't get it

Investing / Funding & Currency conversions
1

Last year, I bought some shares of the USD-based Invesco FTSE All-World (IE000716YHJ7) through neon. With neon, everything you buy is on BX Swiss in CHF. When looking up the price on BX Swiss’ website, they’re in CHF as well.

The same ETF can also be bought on SIX in CHF, USD, GBP and EUR, although not with neon (they’re limited to BX Swiss).

Today I received my yearly report by Hypothekarbank Lenzburg (the bank behind neon). There I see the ETF listed in USD. Why? I thought I would always trade (buy AND sell) this ETF in CHF, and any currency conversion would happen “behind the scenes”?

Let’s say I’d have bought the same ETF in CHF on SIX through Swissquote. Would it land as USD in my portfolio as well?

2

I’m guessing USD have higher volumes and liquidity and lower spreads.

3

All major global ETFs do their accounting in USD. This is the primary currency that is used to calculate the value of the fund units (NAV). For trading at different exchanges, the estimated value in another currency is calculated by market makers, but this is not the “official” value.

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4

Thanks for your replies.

I know that the ETF is based on USD. My question was what the point is in buying the ETF in another currency. Or did I misunderstand this and it is actually not possible to buy it in another currency, and the listings in CHF, EUR etc. are just so you don’t have to manually convert the price in your head?

Asked differently: the above ETF is listed on SIX in CHF, USD, EUR and GBP. If I had only CHF in my broker’s account, would buying the ETF in CHF produce exactly the same result as buying it in USD? Would it land in USD in my portfolio, would I have had to pay the same currency exchange fees etc.?

5

No, if you directly trade in CHF at SIX, there is no currency exchange by the broker. Your counterparty (e.g. a market maker) may perform a currency exchange but you don’t pay any fees for that. You just need to make sure that the spread is not too large.

The shares of this ETF that you can buy in CHF or USD are identical (same ISIN, fungible). Brokers typically list the market value / last price in the currency that you’ve traded. However, it doesn’t really matter. Brokers can even change your existing position to a different currency without a trade (at Swissquote that costs CHF 50).

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6

Thank you. This clears up a lot.

So neon uses the USD variant, probably because of the reasons PhilMongoose mentioned, which should be functionally equivalent to the CHF variant because there are no currency exchange fees with neon invest (except for dividends).

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No. Neon trades in CHF as far as I understand. But they show the value of units in USD as fund’s primary currency.

Should be of 0 importance for you. For a tax declaration, you take CHF value of one unit from ictax.

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8

Got it. I’m just wondering if I’m leaving money on the table compared to, say, buying this ETF with Swissquote (I know that fees other than currency conversion are cheaper with other like IBKR or Degiro).

Thanks everyone!

PS: I got an e-mail from neon today confirming that customers will receive an eTax document at the end of February.

9

I think I recently mentioned this: Don‘t think of different „versions“ of ETFs just cause they may trade in different currencies. They aren’t any different when they’re the same ISIN. And I’m not aware of any major ETFs that have different „versions“ or share classes to trade in different currencies (though they may have separate accumulating and distributing share classes - or different „versions“ with or without currency hedging).

Rather think of them as the same product - but traded in different marketplaces (the same chocolate bar or box of corn flakes that’s sold for CHF in Switzerland may be sold for EUR in France or Germany).

…to a different depository, you mean? (admittedly nitpicking but not inappropriately here, IMO)

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I would have expected that at least in some cases the shares could remain at the same depository given that the ISIN doesn’t change. However, I don’t know much about depositories, so I may be wrong. It’s not something you directly see as a client of a broker.

11

All stocks on the BX Swiss are listed in CHF. The reason for this is that trades on BX Swiss are to and from market makers that price their goods in CHF (and likely profit from currency arbitration). However, the securities themselves are denominated by whichever currency they are denominated by. The pricing in CHF only affects buying and selling on the BX Swiss.

The primary advantage of using the BX Swiss is that it has arrangements with certain banks (like Flowbank and Hypothekarbank Lenzburg) that allow for trading with low or no brokerage fees (brokers are compensated by the market makers).

Buying and selling in CHF can also possibly be advantageous if you earn and invest Swiss francs, as you avoid your broker’s currency exchange costs, but this of course depends on how CHF stock prices compare to those on other exchanges in USD, EUR, etc.

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