Demystifying CDP Accounts

Entering the realm of personal finance can be a daunting task, especially when confronted with unfamiliar terms like “CDP Account”. Fear not, we’re here to simplify it for you. CDP, short for “Central Depository”, is a crucial player in the financial sector, performing three significant roles: Central Counterparty, Securities Settlement System, and Central Securities Depository. The CDP, established by the Singapore Exchange (SGX) in 1987, is tasked with securing all your Singaporean share transactions. But what does this mean in practice? Let’s delve into the specifics of each role the CDP plays.

If you’re new to personal finance, you may have come across the term “CDP Account” and wondered what it means. Don’t worry – we’re here to help! In simple terms, CDP stands for “Central Depositary” and it plays three key roles in the financial industry: Central Counterparty, Securities Settlement System, and Central Securities Depository.

Established by SGX (Singapore Exchange) in 1987, the CDP is responsible for securing all your transactions of Singaporean shares. But what does that actually mean? Let’s dive deeper into each role of the CDP to find out.

Role 1: The Central Counterparty

As a Central Counterparty, the CDP acts as an intermediary, ensuring the security of all your transactions on the SGX. It plays the role of the buyer for every seller and the seller for every buyer, mitigating risks associated with credit and delivery. In essence, it provides a safety net for all your assets traded in the Singaporean market. So, whenever you buy or sell a security, the CDP eliminates settlement uncertainty, ensuring a seamless transaction.

Role 2: The Securities Settlement System

The CDP, in its role as a Securities Settlement System, guarantees the delivery of your securities, such as stocks and ETFs, irrespective of whether you are buying or selling. There are two ways to settle your trades: Delivery Versus Payment (DVP) or Free of Charge (FOC). DVP implies that securities are only transferred when funds have been transferred, while FOC does not require a corresponding flow of funds to transfer securities. This flexibility allows you to choose the settlement method that best suits your needs.

Role 3: The Central Securities Depository

As a Central Securities Depository, the CDP holds all your securities for you. Much like a bank holding your savings, all securities traded through a CDP-linked trading account will be held in the CDP. This provides a secure and centralized location for your investments. However, it’s important to note that there is an alternative to keeping your shares in the CDP, which we’ll discuss later in the article.

The Three Main Types of CDP Accounts

Having understood what a CDP account is and its various roles, let’s delve into the three main types of CDP accounts: Individual, Joint, and Corporate. While there are different account options available, most individuals interested in personal finance will likely be looking to open either an Individual or Joint account.

Individual Account

An Individual account is a personal trading account that you open for yourself. It’s the most common type of CDP account and can be opened online without having to mail physical documents to SGX. There are a few important requirements to note for Individual accounts:

  • You must be 18 and above to be eligible to open an Individual account.
  • You cannot be an undischarged bankrupt.
  • You can create your account via the SGX website and sign in using MyInfo, which quickly retrieves all your personal information for you.
  • Individual accounts only allow you to apply for Singapore Treasury Bills and Singapore Saving Bonds.

With an Individual account, you have sole access to your account, and you’ll need a broker, also known as a Depositary Agent, to trade on the Singaporean market.

Joint Account

Unlike Individual accounts, Joint accounts can be held by two individuals. There are two types of Joint accounts: Joint-Alternate and Joint-And.

  • Joint-Alternate Account: With a Joint-Alternate account, either of the applicants can give instructions to the CDP. This means that both account holders can trade shares or withdraw money from the CDP. It’s important to note that Direct Credit Servicing (DCS), which allows you to directly credit dividends or cash distributions into your Singaporean bank account, is currently only available for Individual accounts and Joint-Alternate accounts.

  • Joint-And Account: A Joint-And account is also shared by two individuals, but with a Joint-And account, both parties must jointly sign and give instructions to the CDP. This means that both parties need to approve any trading actions. However, CDP does not offer DCS for Joint-And accounts.

Corporate Account

Corporate accounts, as the name suggests, are for corporations or companies. These accounts are also known as Trustee accounts, as they are held under the name of the company rather than an individual. To open a corporate account, the applicant must be a duly incorporated body with limited liability. Any proceeds or losses from the account will go to the corporation, not individuals. It’s important to note that CDP does not offer DCS or online applications for corporate accounts.

The Upsides of a CDP Account

Now that we understand the different types of CDP accounts, let’s explore the advantages of having a CDP account.


One of the primary advantages of having a CDP account is ownership. When you purchase securities through your CDP-linked brokerage, you legally own those shares. This ownership comes with several benefits. Firstly, you’ll be in direct contact with the companies you invest in. This means you’ll receive invitations to Annual General Meetings (AGMs) and any shareholder notifications. AGMs are important events where companies present their financial performance to shareholders, and as an invitee, you can ask questions and enjoy some free refreshments. Secondly, you’ll be entitled to have your dividends directly credited into your specified bank account through DCS.

Brokerage Flexibility

Having a CDP account allows you to link multiple brokerages to your account. This flexibility means you can take advantage of ongoing promotions and different advantages offered by different brokerages. For example, one brokerage may have a wider variety of asset classes, while another may offer better commission rates. By signing up for multiple brokerages, you can have more access to functions and potentially lower costs. However, it’s important to note that each brokerage charges a unique commission fee, so be aware of the fees before choosing a trading account.


When you purchase securities through your CDP-linked trading account, your shares are secure even if your brokerage faces financial difficulties or bankruptcy. Since your shares are held in the CDP, the brokerage does not have ownership over them. This provides an additional layer of security for your investments.

The Downsides of CDP Accounts

While there are advantages to having a CDP account, it’s important to consider the disadvantages as well.

High Fees

Using a CDP-linked account to trade comes with various fees. These include a clearing fee of 0.0325%, a 0.0075% SGX trading fee, a $75 processing fee for each failed contract, and a 0.75% brokerage rate for each buy-in contract. These fees can erode any earnings you make from trading, so be sure to read the fine print and understand the fees associated with your trading account.

Limited Trading with Foreign Securities

The CDP is limited to securing and conducting trades with Singapore-listed securities. If you want to trade in foreign markets, such as the Nasdaq or the London Stock Exchange, you’ll need to open a custodian account with a brokerage that offers access to those markets.

An Alternative to CDP: Custodian Accounts on Brokerages

If you’re looking for an alternative to using a CDP account, custodian accounts offered by brokerages may be the solution. Custodian accounts, as explained by Investopedia, are accounts where a financial institution holds customers’ securities for safekeeping to minimize the risk of theft or loss. Let’s explore this option in more detail.

Lower Brokerage Fees

Brokerages typically offer lower brokerage fees for custodian accounts compared to CDP-linked accounts. This is because they are not bound by the high fees charged by the CDP. By keeping you on their platform, brokerages can offer lower fees and potentially earn more from you in the long run. However, it’s important to note that brokerages may have other fees, such as inactivity fees and maintenance fees, so be aware of the charges associated with your chosen brokerage.

Access to Foreign Markets

If you want to diversify your portfolio beyond the Singaporean market, custodian accounts are necessary. The CDP only facilitates trades in the Singaporean market, so you’ll need a custodian account with a brokerage to trade in foreign markets. This allows you to expand your investment options and take advantage of opportunities in international markets.

The Drawbacks of Custodian Accounts

While custodian accounts have their advantages, there are also disadvantages to consider.

No Direct Ownership of Securities

With a custodian account, your purchased securities are not held under your name. Instead, they are held under the custody of the brokerage. While this provides an additional layer of security, it means you do not have legal ownership of the securities. As a result, you will not receive notifications of corporate actions, such as dividend reinvestment plans or stock splits. Additionally, companies will not invite you to AGMs. Instead, brokerages are allowed to send proxies to attend AGMs on behalf of investors.

Wrapping Up

CDP, or “Central Depository”, plays three key roles: Central Counterparty, Securities Settlement System, and Central Securities Depository. The CDP ensures the security of transactions on the SGX by acting as an intermediary and eliminating credit and delivery risks. It holds securities for individuals and corporations and offers Individual, Joint, and Corporate accounts. Advantages of a CDP account include ownership, brokerage flexibility, and security. However, there are also disadvantages such as high fees and limited trading with foreign securities.

Custodian accounts offered by brokerages are an alternative to CDP accounts and offer lower brokerage fees and access to foreign markets. However, custodian accounts lack ownership of securities. It’s important to research and consider your needs before choosing an account type.

Now that you have a better understanding of CDP accounts, you can make an informed decision about whether to open one or opt for a custodian account. It’s important to consider your needs and thoroughly research before making a decision. If investing seems too complicated, you can always seek the help of a certified financial advisor who can guide you in making the right investment choices. Remember, your financial future is in your hands, and having the right knowledge and support can make all the difference.

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Benjamin Low
Benjamin Low

Benjamin is known as The Passive Income Guy. He has helped hundreds of people to build passive income. He is also a member of the Million Dollar Round Table, and Certified Financial Planner™ (CFP®) and Certified Private Banker (CPB).

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