According to Trading 212, the actual cost to a broker of executing a retail trade is under £1, meaning that investors using traditional brokers are on average paying a multiple of 1,000%
Fast-growing Fintech company, Trading 212 is disrupting the UK stock broking market with the launch of the first zero commission share trading platform. This is the first time UK retail investors will be able to buy and sell shares without having their returns eaten up by the exorbitant commission charged by brokers.
Trading 212 allows investors to make 10 trades per month and up to £10,000 equity per trade commission free, which it estimates will cover the needs of approximately 90% of its customers. It charges larger and more active traders a commission of just £1.95 + 0.05% per trade. Trading 212 users will have full regulatory protection as Avus Capital UK Limited, the parent company, is authorised and regulated by the Financial Conduct Authority.
Trading 212’s research reveals that the average commission charged by five of the largest UK online share dealing platforms per trade is £10.01. Popular brokers such as Hargreaves Lansdown and TD Direct charge £11.95 and £12.50 respectively per online trade, and £5.95 for higher volumes of trades.
According to Trading 212, the actual cost to a broker of executing a retail trade is under £1, meaning that investors using traditional brokers are on average paying a multiple of 1000%.
As an example, a consumer looking to build a share portfolio over five years by investing £300 a month placing three trades using Hargreaves Lansdown will pay £2,151 in commission and platform charges, the equivalent to 12.5% of their investment. Assuming a market neutral environment, a Trading 212 investor using the scenario above would see their portfolio grow to £18,000 but if they were to choose Hargreaves Lansdown it would be worth £15,849.
ONS figures show that the percentage ownership of UK stocks by individuals declined from 14.9% in 2003 to 11.9% in 2014. According to Trading 212, a key reason for the fall is that high transaction costs for retail investors make it a disproportionately expensive investment.
Ivan Ashminov, Co-Founder of Trading 212, said: “The commissions charged by UK brokers are nothing short of a disgrace. Brokers are charging multiples of the actual cost of executing a trade, not margins. We want to completely shake up retail share trading by democratising the marketplace so smaller investors are no longer penalised for putting their money to work.
“Our zero commission approach will not only attract customers from other brokers but bring new investors into the market, particularly younger people as they are more sensitive to overpaying and keen to use new apps.”
David Black, an independent retail investment analyst, commented: “The fintech sector is constantly evolving with new entrants offering differentiated service and charging models. Trading 212’s entry with zero commission on share dealing brings competition to another level and will pose a serious concern to the established brokers.”
Trading 212 will provide superfast execution and access initially to over 1,500 commonly traded UK, US and German stocks and over time will expand into other markets. It is available by downloading the Trading 212 app on both Android and iOS devices. It is easy to use and applies the latest technology to provide investors with a straightforward and highly secure way to buy and sell shares.
The Trading 212 app also offers free access to advanced features such as technical analysis and a number of integrated social media features – such as video tutorials and a live chat room – to encourage greater engagement and education around trading in shares.
Ivan Ashminov added: “We look forward to rapidly growing our UK customer base before expanding into other European markets. Ultimately we see Trading 212 as a universal app for trading and investing across all asset types.”
Trading 212’s new zero commission share trading platform follows the successful launch of its FX service, which has been the most popular and fastest-growing FX trading app in the UK since 2016 and has a total of over seven million downloads.