Types of CDS Accounts and How to Trade Stocks Without Capital
There are many types of CDS accounts, depending on what criteria you use to categorise them.
Generally, we can differentiate CDS accounts from the perspective of:
- Shariah Compliance
- Shareholding Status or Actual Ownership of the Account
- Capital Available for Investment
Two Types of CDS Accounts From the Shariah Compliance Perspective
Many people already know that to start investing in BURSA MALAYSIA, you first need a CDS ACCOUNT to begin trading. However, many still do not know that CDS accounts are divided into two types:
- Islamic CDS Account
- Conventional CDS Account
Many simply open an account without knowing whether it is ISLAMIC or CONVENTIONAL. That is one issue. Secondly, as MUSLIMS, we are obligated to choose the ISLAMIC option.
For the difference between ISLAMIC and CONVENTIONAL, refer to Image 1.
Advantages of Islamic CDS Account
In summary, the advantages of an Islamic CDS account are:
- You do not need to worry about accidentally buying non-Shariah compliant stocks. Your CDS account WILL NOT ALLOW you to purchase non-Shariah compliant stocks.
- Surplus funds such as dividends from money you place in the CDS trust — but do not use for trading — are halal without doubt.
- Lower risk. Typically, an Islamic account is a cash-type account. Therefore, you are not exposed to the risk of losing money that is not yours.
Flowchart of Relationships Between Market Participants Regarding the Shariah Compliant Investment System
List of Brokers Offering Islamic CDS Accounts
On the Bursa Malaysia website, we can see that there are 11 brokers offering ISLAMIC CDS ACCOUNTS, either on a "FULL-FLEDGED" or "WINDOW BASIS".
The list of these brokers is:
- Malacca Securities Sdn Bhd
- BIMB Securities Sdn Bhd
- Affin Hwang Capital
- Aminvestment Bank
- Maybank Investment Bank
- RHB Investment Bank
- HongLeong Investment Bank
- Public Investment Bank
- MIDF Investment
- Jupiter Securities Sdn Bhd
- Kenanga
- TA Securities
- Inter-pacific Securities Sdn Bhd
- CIMB Securities
Source: Bursa Malaysia
1. Direct CDS
This account is registered under your name. This means your own name will be listed in the company''s shareholder register for the stocks you invest in.
2. Nominee CDS
This account is not registered under your name; instead, the brokerage firm acts as your representative.
Now that you understand the meaning, let us look at the diagram that has been prepared showing the differences between DIRECT and NOMINEE.
Rakuten Is a Nominee Type Account
Many may not yet be familiar with Rakuten, but it is gaining traction within the stock community.
The brokerage fees offered are comparable to the Mplus CDS account that we promote.
You can even open a CDS account online — on working days, it can be completed within 1 to 3 hours.
However...
A Rakuten CDS account is not a direct-type account. So, as discussed above, there are several things you cannot do:
- You are not eligible to attend the annual general meeting (AGM). In other words, this account is not suitable for long-term investors.
- Corporate exercises such as dividend payments must go through an intermediary, namely Rakuten. This means they will charge additional fees.
- Nominee-type accounts cannot be used to purchase IPO (Initial Public Offering) shares. Therefore, you have fewer opportunities to profit from IPO investments or trading.
Types of Accounts Based on Capital Available for Trading
In this article''s title, we also included the question "How to Trade Stocks Without Capital".
Does it make sense to trade stocks without any capital?
The answer is yes, it does.
Not many know this answer due to a lack of understanding about the types of accounts available.
So without wasting time, let us move on to the types of accounts based on the capital you can use for stock investing.
The types of accounts are:
1. Cash Account, also known as Cash Upfront. This type of account requires you to deposit money into your CDS account first. Otherwise, you cannot trade.
The amount you can trade is equal to or slightly less than the amount you deposited (after setting aside a portion as reserve). Simply put, cash x1.
2. Collateral or Limit Account. This account also requires you to place some money or stocks into your trust or CDS account.
The assets you deposit — for a simple example, if you deposit RM10k, the broker will provide 2 or 3 times the cash you have, making your total trading capital RM20-30k.
3. Margin Account
A margin account is almost similar to a collateral or limit account.
The difference is that with a limit account, you only have a few days before you are ''forced'' to settle your debt — the additional leveraged funds provided by the broker.
With a margin account, the borrowed funds can be used as long as you have not faced a ''margin call''.
4. Special Account: ''Clean Limit''. This special type of account requires you to have a good relationship with your remisier.
In this case, you do not even need to put up any capital. You can trade stocks based on the fund approval given by your remisier.
If you profit, the money goes into your trust account.
However, if you lose, your remisier''s money will be deducted.
This is one of the reasons why not many offer this type of account.
Now you understand?
If so, what are you waiting for?
Register for a CDS Account Now!
THE ACCOUNT YOU REGISTER THROUGH US IS ISLAMIC, CASH AND DIRECT
With these three criteria, you do not need to doubt the halal status of your stock trading, you are eligible to apply for IPOs, and you can attend the company''s AGM (annual general meeting) directly.
Requirements to Open a CDS Account
If you have finished reading this and still do not have a CDS account, here are the requirements:
1. 18 years old and above
2. Not bankrupt
3. Have RM10
4. Have an email address
5. Have a bank account
If you meet these requirements, you are eligible to open a CDS account to take your first step in the world of stocks.
I am Maher Alias and I provide CDS account opening services. We are under the broker MALACCA SECURITIES, better known as MPLUS.
I am a remisier. To learn what a remisier is, you can read Check Your Remisier or Financial Planner''s Licence
Want to trade stocks but do not have a CDS account yet?
What are you waiting for? Register for a CDS account with Mahersaham and you can join exclusive classes for Mahersaham clients.