XTB is introducing fractional share trading and the new service will be available from October 2nd when clients will be able to trade in fractions of a wide range of stocks and ETFs from the UK, European and US markets.
What are fractional shares?
Fractional shares are a product which allows investors and traders to own a fraction of an existing stock or ETF.
So for example using fractional share trading you could buy a tenth of a share in chip maker Broadcom (AVGO) which trades at around $816.00 per share and which might otherwise be too expensive for many retail traders.
Fractional share trading also allows clients to get more of their money working for them as they can fully invest their cash. By for example putting $1000.00 into Broadcom by buying 1.22 shares in the stock.
Fractional share trading is commission-free at XTB unless that is your turnover is more than €100,000 per month. In which case your trading will be subject to a commission of 0.2% and a minimum ticket charge of €10.00.
How will fractional shareholders be treated at XTB?
Under fractional share trading at XTB clients who hold fractional holdings in stocks and ETFs wil be treated in the same way as full shareholders and will receive their fiduciary rights such as access to dividends and corporate actions, though fractional shareholders will not enjoy voting rights, as there is currently no mechanism through which holders of less than one share can vote.
How will XTB hold and administer fractional shares?
XTB will hold the underlying stocks that represent the fractional share holdings in a dedicated custody account, for example holding a share of Tesla that might be divided into three fractional holdings, of say, a holding of one-half of a share and two holdings of a quarter of a share each.
How can I access fractional share trading at XTB?
Once fractional share trading commences at XTB clients can access the service by logging on to their XTB account navigating to the stocks tab in the market watch area on the platform and selecting the stock or ETF that they wish to trade. Fractional shares will trade at the same bid-offer prices as the underlying stocks or ETFs.
Be aware
Fractional share trading is a tool that can help democratise investing and bring the benefits of long-term investments to a wider audience. XTB has chosen to mirror the treatment of full shareholders for its new fractional share trading service and it’s not going to treat those holdings as a derivative or CFD.
However, the regulatory and tax treatment of fractional share trading is still something of a grey area, with European regulator ESMA suggesting earlier this year that fractional share trading should be considered as a form of derivatives trading.
And in July HMRC was said to be investigating UK brokers who offered fractional share trading, and whether those fractional shares were ISA eligible. HMRC’s view at the time was that fractional shares were not eligible for XTB ISA inclusion.
With over 35 years of finance experience, Darren is a highly respected and knowledgeable industry expert. With an extensive career covering trading, sales, analytics and research, he has a vast knowledge covering every aspect of the financial markets.
During his career, Darren has acted for and advised major hedge funds and investment banks such as GLG, Thames River, Ruby Capital and CQS, Dresdner Kleinwort and HSBC.
In addition to the financial analysis and commentary he provides as an editor at GoodMoneyGuide.com, his work has been featured in publications including Fool.co.uk.
As well as extensive experience of writing financial commentary, he previously worked as a Market Research & Client Relationships Manager at Admiral Markets UK Ltd, before providing expert insights as a market analyst at Pepperstone.
Darren is an expert in areas like currency, CFDs, equities and derivatives and has authored over 260 guides on GoodMoneyGuide.com.
He has an aptitude for explaining trading concepts in a way that newcomers can understand, such as this guide to day trading Forex at Pepperstone.com
Darren has done interviews and analysis for companies like Queso, including an interview on technical trading levels.
A well known authority in the industry, he has provided interviews on Bloomberg (UK), CNBC (UK) Reuters (UK), Tiptv (UK), BNN (Canada) and Asharq Bloomberg Arabia.
