Pan European online broker Degiro has launched a new commission-free trading service. The firm which is now one of Europe’s largest brokerages says it aiming to change the face of the business on the continent.
What is Degiro offering?
Degiro has launched a commission-free trading service that covers 5000 US equities, listed and traded on the Nasdaq and NYSE exchanges. Degiro customers can now trade those stocks commission-free via the Flatex Degiro platform.
Degiro already offered zero commission trading on a number of Core ETFs, but the range of stocks that can be traded without dealing charges has gotten substantially larger.
Degiro is not stopping there however as it is also launching a zero commission trading service on stocks, that are listed on tier one exchanges in France, Spain, Portugal and Italy, as well as the Nordic countries.
The European, commission-free share trading service will launch on the 20th of December.
Degiro has also harmonised and simplified its fee structure to make it more transparent and aligned, with what the firm calls the competitive landscape of online brokerage.
Trades in Asia Pacific equities will now attract a flat €5.00 per trade fee. Bond transactions will be charged at €2.00 euros whilst deals in European equities, not covered by the zero-commission service, will attract fees of €3.90 per trade.
Is Degiro a major player?
Degiro operates in 18 countries across Europe and has 1.25 million customers, who generated 75 million transactions in 2020. As such it’s considered to be among the largest online brokers in Europe, rivalling the likes of IG Group, Fineco and Saxo Bank.
The broker has two brands Degiro and Flatex and employs more than 900 members of staff
Founded 15 years ago as Flatex in Germany the parent group, Flatex AG became a 100% shareholder in Degiro in 2020. Flatex AG is listed in Frankfurt and is a member of the SDAX index.
What will this mean for other brokers and their customers?
Trading US equities commission free is nothing new, however, firms that offered this service have often subsidised it through the use of payment for order flow, whereby the broker sells its retail business flow to a market maker or high-frequency trader in return for a fee. Raising questions about conflicts of interest.
Payment for order flow is prohibited in European equity trading and Degiro makes the point that its new services will not be reliant on PFOF rebates.
So Degiro’s announcement has the potential to disrupt the market on two fronts driving down trading commissions and reconfiguring the business model for low-cost brokers.
Flatex and Degiro have remained tight-lipped about exactly how they are able to offer zero commission trading though the firm recently said it would welcome a permanent ban on the sale of client order flow, which it believes would have a positive effect on its business model.
The Good Money Guide will be watching to see what happens when the commission-free European equity trading service goes live, in just under a month.
As no doubt will many of Flatex Degiros peers.
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