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.
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.
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.
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.
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.
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 ISA inclusion.