Where to buy from - what Stock Exchange, Domicile, Country, etc

Hi all,

Although I have been investing for more than a year, there one think I keep on asking myself. And now that I switch to IB I believe its time to shed some light on this, once and for all. Questions are usually around the domicile of a fund, the country of the stock exchange, the curency and how to make choises.

The following is my thought process that exposes the questions I have, some that I have already answered, some i cannot not. But I hope this will help me or others.

Example :

I want to buy VT (Vanguard Total World ETF).

This seems to be the official page : https://investor.vanguard.com/etf/profile/VT, but its already not clear:

  1. Why can’t I see, on this page, the ISIN identifier ?

I am clearly missing something, so I deeper. I also find http://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P0000G5T2. This has the expected ISIN number, that is US9220427424. Starts with US, so I guess at this time, this is a US domiciled fund and is traded on ARCA (NY stock exchange)

  1. Is the ISIN number unique per IndexFund/Stock Exchange combination ? Can there be the same Index Fund on another Exchange, since I cannot trade on ARCA ?

Then, to answer my question, I search for VWRL on Degiro. I find 3 ETFs, on the main stock exchanges : SWX (CHF), EAM (EUR), LSE (GBP). All with the same ISIN! So there can be same ETF, same ISIN (IE00B3RBWM25), but listed on different stock exchanges, and with differnet denominations! then the question is…

  1. Does it matter Where the stock exchange is from, sice the ETF is the same ? The real issue as far as I know, regarding taxes, is the domicile of the ETF, not the country of the stock exchange or the currency.

  2. Then, the next important question is, how do you make a choise ? I have currently EUR, CHF and USD and I can invest, with IB, pretty much anywhere. Is it ok to ignore the initial currency exchange so that I go to the “right” one ?

I hope I make sense, and also I hope other people have the same issues as I do :slight_smile:
Thanks!
Vlad

Because in US the CUSIP is more widely used. And ISIN is country-code + CUSIP + single-digit-check.

per Index/Fund

Yes, same instrument (identified by ISIN) can be traded via multiple exchanges - always via the same ISIN.

I’m guessing theoretically there might be a difference, in terms of how the security is tracked by your broker.

Practically the main difference is probably the costs:

  • different exchanges have different liquidity and thus different spreads. Spreads aren’t to be neglected.
  • also, brokers have different fees for different exchanges. Plus there’s taxes for some.
  • and different exchanges will have the same security offered in different currencies. So if you’re after a particular currency that might restrict the available security-exchange-broker combinations.

That’s certainly one of the main long-term aspect, agreed.

I’d say so, yes. Generally speaking it depends on which broker you use. For some it might be prohibitively expensive to do FX. For IB it is cheap, so it doesn’t matter much. In this case I’d look at the most liquid exchange. But essentially it is based on a formula which is something like: spread + exchange_fee + FX_fee - but liquidity is an aspect that might become handy in turbulent times, so that is probably more relevant than strict fees.
Mind you, the dividends are typically paid out in the base currency of the fund, not necessarily in the one you bought it in. So if they don’t match, you would have to eventually do another FX (but that might not matter much again, as in IB’s case)

5 Likes

Great answer male!

I agree with everything but I’m not sure I agree with this:

Liquidity of ETFs is different than liquidity of stocks. The ETF issuer can just create shares to continue tracking the index.

I’m not sure that there is anything other than spread + exchange_fee + FX_fee to consider.

Right - cant compare it with stocks.

Thats another aspect though.

I was referring to a crash where the ETF/market maker switches to a huge spread to wait things out (this does and will happen). If you’re on some side-exchange that’s it: you have to pay the spread (if you want/need to trade in those moments). If you’re on the main market (there usually is a main one) you might get better offers.

Hi @notme123 you can also have a look at this thread on the topic

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