The new charges will come into effect in the UK from the 13th of February 2020. IG’s share dealing client base in Australia will get its own revised commission schedule over the summer months.
Starting with what it calls the UK best commission, a discounted rate for active traders which has been reduced to just £3.00 per trade from the previous £5.00 per trade charge.
The hurdles to qualify for this discounted commission rate has also been sharply lowered
Under IG’s old schedule of charges, traders need to have traded 10 times in the prior month to qualify for the reduced commission, but from Thursday, that will be reduced to just 3 trades in the previous months business.
There are some dramatic changes too in the way that IG charges for trades in US shares. Under the old system, clients paid a standard commission of 2 US cents per share, the equivalent of $20.00 per 1000 shares traded. But going forward they will now pay a standard rate of a flat £10.00.
There is even better news for those customers who actively trade US equities as IG’s best commission on US share trading falls to zero. Traders will need to have dealt three times in US stocks 3 times in the prior month to qualify for the commission-free trading offer.
What does not change however are the fees associated with FX conversions and custody or inactivity, which remain at 0.50% and £24 respectively.
Competition for the execution-only commission pound or dollar has intensified over the last 18 months. That competition became all the more intense in the autumn of last year when one of the world’s largest online players, Interactive Brokers, announced that it was launching a commission-free deal of its own, to compete with the disruptors such as Robin Hood.
That news prompted a wave of cost-cutting and consolidation among other US online brokers
Commission-free share dealing in the UK is the not norm because the FCA does not allow the payment for order flow that supports the practice stateside. Where America leads the UK often follows, however. And IG is obviously sensitive to its customers’ expectations of lower fees.
As we recently noted, the stockbroking and investment division of IG has to date been unable to generate significant revenues, when compared to the margin trading side of the business. These latest moves are no doubt aimed at boosting market share for the physical share dealing business.
Competition and the reduction in fees that usually accompanies it are to be welcomed of course, but only up to a point, because as the old market adage has it there a few winners if any in a race to the bottom.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.