Building Freetrade

Fractional shares for all

Freetrade Team

July 4, 2019

Freetrade Team

A major step on fractional shares.

Fractional shares have been part of the Freetrade plan since the start. We want to open up investment in all companies’ stocks or ETFs, no matter how much money a customer wants to invest.

We’ve just had a big step forward on fractional shares, as the FCA have granted us new permissions.

What are fractional shares? 🤔

They are essentially as they sound — that is, they are a fraction of a stock.

For example, let’s say you have £25 to invest and one Unilever share costs £50. In that scenario right now, you wouldn’t be able to invest in Unilever shares on any platform. When we roll out fractional shares, however, a Freetrade customer will be able to invest by buying half a share.

Fractional shares also mean that rather than specifying the number of shares to buy each month, for example, you’ll be able to specify a cash amount to invest, which makes it easier to manage as part of a savings strategy and can enable features such as automated reinvestment of dividends in the future.

A new function, a new licence 🎁

We have been working with the FCA for some time on being able to offer fractional share investment to our customers. For us, it meant applying for what is known as a ‘Variation of Permission’, or ‘VOP’ to us reg geeks. 🤓

The additional permission allows us to deal in shares in our own name, which we need to do in order to facilitate customers’ investment in fractional shares.

We were of course already authorised by the FCA to provide services to our customers, but the extra permission means that they hold us to a different standard.

Happily, we can now announce that our application to the FCA has been approved.

A first for Europe 🇪🇺

By combining our new permission with the new technology that we are building, we will be the first stockbroker to offer fractional share investment in UK shares and ETFs (and soon, EEA).

In the US, fractional share investment is an established service, which we are also plugging into in order to open this up to our customers for US shares.

You may have come across fractional investment before at some other platforms. In particular, some CFD providers offer fractional investment. Except, in their case, the customer ends up with a CFD position, rather than owning a portion of the underlying share.

This is very different from what we have built and presents different risks to customers. With Freetrade, our customers will own a portion of a share, which is held as client assets in accordance with FCA rules.

We are all super excited about this development and the access and functionality it can unlock for our customers. It would be great to hear your thoughts too!

~ Dan, Head of Risk and Compliance

Important information

This should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.

When you invest, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.

Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales (no. 09797821).

The views expressed above are those of community members and do not reflect the views of Freetrade. It is not investment advice and we always encourage you to do your own research.

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