Trading 212 has just pioneered a brand new product in the retail foreign exchange and CFDs brokerage space. The company has made stock trading free for its clients in the UK and Germany. The industry-disrupting move comes at a critical time for the industry.
The London-headquartered brokerage company expands on the firm’s commission-free stock trading from last year. At the time the firm’s clients could execute for free up to 10 share trades each worth up to £10,000 per month. The brokerage’s new zero-commission trading removes all limits.
Trading 212’s commission-free trading includes not only shares but also ETFs. The company is aiming to diversify its client base at a time when the forex and CFDs brokerage industry is facing the tough challenge of the new ESMA regulatory framework.
Independent retail investment analyst, David Black, commented: “The Trading Platform market has never been more exciting in terms of innovation and service. More providers are coming into the market and are constantly pushing back the boundaries. Trading 212’s announcement today is the strongest example yet of what to expect.”
Industry-Shifting Move
The introduction of leverage caps on retail trading accounts which the ESMA forced upon the industry is prompting a change in the product mix offered by retail brokers. Trading 212 is the first company from the industry to bank on an increasing role of physical stock trading for the sector.
The co-founder of Trading 212, Ivan Ashminov, elaborated on the company’s move: “Being the first company to offer UK investors a commission-free trading environment speaks to our long-held belief that this charging practice can no longer be justified.”
“It will add further pressure on the established players who have been allowed to fleece investors for too long. Our cutting-edge technology means that the actual cost of executing a retail trade is negligible but the impact of commission and platform charges on the customers’ returns can be huge,” Ashminov elaborated.
Zero-commission stock trading opens the door to a whole new crowd for the FCA-regulated brokerage. The company is banking on attracting clients from a wider array of traditional stock traders.
The space is seen as ripe for disruption as a September study from DJB Research shows that the average commission charged by five of the largest share-dealing companies in the UK was £8.31 per share.
Trading 212’s platform has recently become the highest rated financial trading app in the UK. The product was downloaded over 12 million times across Apple’s Appstore and via Google Play.
UK Individual Savings Accounts
On top of its zero-commission stocks and ETFs trading, the London-based brokerage company will also offer UK clients ISA-compliant wrappers. The Individual Savings Accounts (ISAs) in the UK are offering tax-free savings for a list of eligible stocks and ETFs. For the 2018 and 2019 tax years, investors can save up to £20,000 via using ISAs.
Ashminov is highlighting the company’s contrasting focus to the broad retail brokerage industry which is still enthused about crypto trading.
“We want to democratize the ownership of shares and ETFs, so investors can enjoy their long-term benefits. It’s only a matter of time before the established players will have to get rid of commissions altogether,” he elaborated.
Disrupting Stock Trading in Europe
While Robinhood pioneered commission-free trading in the US, consumers in Europe haven't had the opportunity to participate in the app-revolution of stock trading until now.
Elaborating on the company's business model to the FT, Ashminov said that in contrast to its competitors the firm doesn't plan to sell flow to high-frequency traders.
“We have a longer-term vision. We want to build a big base of accounts and offer certain optional services on top of that to generate revenue,” Ashminov elaborated.
The move made by the brokerage is sure to turn some heads across the industry. While parts of the companies on the market have been focusing on how to reclassify its traders to professionals, Trading 212 is banking on attracting a whole new breed of customers.
The company also shared that it is removing all commissions from trading Cryptocurrencies and Contracts for Difference (CFDs).
