How to Read a Broker StatementStart here

The document that tells you what you own, what it cost, and what was quietly taken. Four sections, of which most people read one.

The four sections

• Positions — what you hold and what it is marked at.
• Cash — every movement, including the ones with no trade attached.
• Transactions — what you did and what each one actually cost.
• Charges and interest — the section that is not about anything you did.

Most people read the first one, look at the total, and stop. The second and fourth contain the information.

1. Positions: what the valuation is and is not

• The mark is usually a closing mid price, which is neither what you would receive nor what you paid. On a wide-spread instrument that gap is real money and it is not shown.
• Check the currency of each valuation and the rate used to convert it. FX rates applied to statements are a decision, and it is rarely the interbank rate.
• Unrealised profit is computed from a cost basis whose method — average cost, first-in-first-out, or something else — is a convention the broker chose. It may not match how your tax authority computes it.
• Look for anything you do not recognise. Fractional entitlements from corporate actions, residual amounts, and forgotten small holdings accumulate silently.

2. Cash: the ledger that tells the truth

• Withholding tax appears here and nowhere else. A 15% or 30% deduction on foreign dividends is frequently the largest single cost in the whole document, and it never appears as a "fee".
• Cash interest is the quiet one. In a high-rate environment, interest earned on your uninvested balance and not passed on can exceed every disclosed charge combined.
• FX conversion charges compound with turnover. A 0.5% conversion on each leg of a foreign purchase and sale is 1% round trip, dwarfing the commission that was advertised.

3. Transactions: the true cost of each trade

• Commission is the visible part and usually the smaller part. The spread paid is invisible: it is the difference between your fill and the mid at the moment you traded, and no statement shows it.
• Compare the fill against the day's range. Consistently filling near the worst of the day is a routing or timing problem worth understanding — see order types.
• Check the settlement date, not just the trade date. Cash is not available until settlement, and accrued interest on bonds is calculated to it.
• Transaction taxes — stamp duties, financial transaction taxes — appear as separate lines in some markets and are unavoidable.
• Quantify the full round trip with the spread and cost calculator, then multiply by your actual turnover.

4. The annual costs and charges disclosure

• Many jurisdictions now require an annual statement of all costs, expressed in cash and as a percentage. It aggregates platform costs, product costs and transaction costs in one place.
• It is the single most useful document your provider sends you, and it is the one that arrives with the least fanfare.
• Compare the percentage against the return for the same period. Seeing costs as a share of what was actually earned is a different experience from seeing them as a share of assets.
• Then compound it with the cost-of-ownership calculator over the horizon you actually expect to hold.

Custody: the part that is not about money

• Are your securities held in your name or in an omnibus account? Both are normal; they behave differently if the broker fails.
• Is client money segregated, and where is it held? This is disclosed and is the question that mattered at FTX and at every broker failure before it.
• What investor compensation scheme applies, to what limit, and to which assets? Cash and securities are frequently treated differently — see investor protection.
• Are your holdings being lent out, under what terms, and who keeps the revenue? Some retail programmes disclose this clearly and some do not.

The quarterly checklist

• Does every cash line have an explanation?
• What withholding tax was deducted, and is any of it reclaimable in my situation?
• What am I earning on cash, and what is the provider earning on it?
• What did FX conversion cost across the period?
• Any position I do not recognise or no longer have a reason for?
• Annual costs as a percentage of assets, and as a share of the return?