Custody expenses

Custody expenses, or custody commissions, are those expenses that are generated by the maintenance of certain financial assets in the securities or financial markets, such as shares of companies or state treasury bills.

When, for example, we want to acquire a portfolio of shares, we cannot do it directly: we need an intermediary to acquire that portfolio in our name. Normally these intermediaries are usually financial entities .  And these entities charge a commission for maintaining and managing said portfolio of shares. This commission is called custody expenses.

Amount of custody expenses

The custody commission is established as a percentage with respect to the total investment. That is, the greater the investment in shares or treasury bills, the greater the custody fees. There is no set amount for custody expenses: each financial entity may charge a different commission depending on the type of product or other circumstances it deems appropriate. What is usual is to establish a minimum commission (see example of the end).

How often are custody charges charged?

They are usually charged monthly, quarterly or annually, although any other type of periodicity can be applied. The expenses begin to accrue from the day on which the securities custody and administration contract is signed, that is, from the day on which the shares are acquired. If the shares are acquired on February 1 and expenses are charged monthly, the first payment will be on March 1.

Example custody expenses

Imagine an acquisition of shares valued at 1000 euros, with custody expenses of 1.5% and a minimum commission of € 10.

We calculate 1.5% of € 1000, which is € 15. As it is greater than the minimum commission (which is € 10), € 15 will be custody expenses.

If in the previous example the minimum commission was € 20, these € 20 would be the custody expenses, since it is the minimum that has to be paid, even if the 1.5% of € 1000 is € 15.

by Abdullah Sam
I’m a teacher, researcher and writer. I write about study subjects to improve the learning of college and university students. I write top Quality study notes Mostly, Tech, Games, Education, And Solutions/Tips and Tricks. I am a person who helps students to acquire knowledge, competence or virtue.

Leave a Comment