Does it matter on which stock exchange I buy shares?

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Does it matter on which stock exchange I buy shares?

For an experienced investor, this question may seem strange; however, we asked ourselves this question during our first stock market entry: Does it, for example, matter whether I buy my shares on the Vienna or Frankfurt stock exchange?

The answer can easily be found: generally, no.

It makes no difference whether you buy your shares in Vienna or in Frankfurt. You can also sell your shares in Frankfurt if you have bought them in Vienna.

Why does it make no difference?

That is one of the great things about stock exchanges – they offer so-called “homogeneous goods”. This simply means that shares of one and the same company do not differ – sounds logical, right? The opposite (heterogeneous goods) would be e.g.: artworks or restaurant visits.

Although it mostly does not matter where you buy shares, there can be subtle differences, e.g. in stock exchange fees, which account for part of the order fees. In Germany and Austria for example, to our knowledge all stock exchanges use the XETRA® trading system. So the exchange fees are the same everywhere and it makes no difference at all where you buy shares. A second component that affects the transaction costs of your share purchases are the order fees that your broker charges for its services. Therefore, it is advisable to use an inexpensive online broker. You can find the cheapest offers with the help of our broker comparison calculator.

If you want to trade American stocks at low cost, we recommend (due to the extremely low fees) the offer of CapTrader.

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What about exchange rate differences on different stock markets?

According to this explanation, it would be logical that one share has the same price on each stock market. But that is highly unlikely. The exchange rate almost always deviates slightly.

An attentive reader has now possibly come up with a great new business idea: buying shares in Vienna and then selling them seconds later in Frankfurt at a profit if there are market differences.

This strategy is called arbitrage and is basically possible. However, it is limited on the one hand by transaction costs and on the other hand by the law of supply and demand. Normally, exchange rates adjust very quickly which greatly limits the possibilities for arbitrage.

In our new equity/exchange FAQ’s we want to answer questions that small investors who are going public for the first time might have. These articles may seem strange to experienced stock market players, but we asked ourselves such questions at the beginning of our career.

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  1. Pingback: Degiro: O que é o custo de conectividade? | O investidor Sábio

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