Info 1: maintenance charges definition
Info 2: how maintenance charges identified
Info 3: maintenance charges vs spread fees
Info 4: example of maintenance charges
Opening information:
maintenance charges occupy three matters, maintenance, charges, and fees, maintenance means preservation of one thing, charges mean fee of one thing, and fees mean amount.
maintenance charges are the amount that is paid for preservation.
So now let’s have a look at what is maintenance charges, how maintenance charges work in the public market, and what is the difference between maintenance charges and spread fees, finally one clear example of maintenance charges.
Info 1: maintenance charges definition
Mr.michel is a small stock investor who deposits and trades the stock and other commodities securities in the short-term time frame. He couldn’t have any choice but to buy and sell public securities directly from the stock exchange industry.
In spite, he used the brokerage account to trade the stock and other public securities with a registered broker on the financial Industry-regulated authority. Whenever Michel bought the stock, they took 2 percent of the positioned amount in his broker account.
Whenever he sold any kind of Holden position in the stock the broker would also take 2 percent of the amount based on the positioned size.
On the other hand, each year Michel’s stock broker had taken the 250 dollars to keep his account under their business. This helps Michel to trade any amount of Securities at any time.
Here the broker taking money from the Michel account for selling and holding the Investment account to trade are considered as charges.
Info 2: how are maintenance charges identified
The maintenance charges don’t apply to any specific individual or thing, instead, it’s an idea to cut off some amount for benefited works.
Therefore any of the persons who are involved in trading or Investment through the third-party platform are trapped in the charge of maintenance fees and other account charges.
None of the amount of money is fixed for charging Maintenance charges and account fees in the public market, these charges happen in a more complex manner with different markets.
If any of the big net worth who involved in the public market by investing a huge part of their net worth in one hedge fund institution, such hedge funds charge the commission and maintenance charges based on the invested amount.
Next, the person who mostly put their money into mutual funds, such as mutual fund managers charges fees for the maintenance of their account each year.
Moreover, the people who are involved in their trading style and strategy use the brokerage account, which that stock broker would also cut off the fees for holding such an account in the market.
However, the hedge funds that list their Industry in any of the stock exchanges, normally pay the maintenance fees that are charged by the stock exchange for holding such hedge funds in the public market.
On the other hand, mutual fund Industries that are listed in the top exchange are charged from the specific stock exchange for holding their business in their market.
Then any of the public businesses that are listed in the top exchange of each country would pay the fees for holding and maintaining their business Ownership in their exchange Industry.
It doesn’t matter in what context each market participant gets charged, if they cut or pay the fees for holding and maintaining their business or account, then it’s called maintenance charge and fees.
Most people confuse the maintenance charges and spread fees. So let’s jump into knowing the key difference in it anyway.
Info 3: maintenance charges vs spread fees
The difference between the maintenance charges and spread fees is, that maintenance fees refer to the amount who is offered the platform for holding and maintaining their position in the Public market.
On the other side, spread fees are not the number of maintenance charges despite they are charged and earned money of market makers or dealers through creating bids and asking.
It didn’t have any relation to maintenance charges. To make you more clear about the maintenance charges, let’s look into one brief example below.
Info 4: example of maintenance charges
Say your brother is a stock Investor, he recently purchased stock G which is about 23 dollars at a bid price and ask price of 21 dollars.
Your brother’s stockbroker charges a fee of about 159 dollars every year, which is only paid every once a year.
Here 159 dollars is what is named as maintenance charges and the $23 bid amount is spread.