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Interactive Brokers Group

Interactive Brokers Rolls Out Fractional Trading

Interactive Brokers follows up IBKR Lite's September launch with fractional share trading for individual accounts; advisors will get the option in coming weeks.

Another brokerage firm is rolling out the ability to trade fractional shares. Interactive Brokers Group announced November 25 that its clients can now trade fractional shares of nearly any U.S. stock. 

Headquartered in Greenwich, Conn., Interactive Brokers said the move is meant to provide more "access and flexibility" to investors.

In fractional trading, the brokerage buys the stock and trades fractions of the equity to end investors.

Along with fractional trading, the firm said clients would have the ability to invest with fixed-dollar sums. Investors who may not be able to shell out $330,685 for a single share of Berkshire Hathaway stock can buy just $100 worth of the firm, or invest a fixed-dollar amount in a basket of securities without calculating the per-share price.

Other brokers that have been offering this for some time. Brokers such as Stockpile, Motif, M1 Finance, Folio Investing, Betterment, and Stash are just a handful for new investors and some advisors to choose from. In October, The Wall Street Journal reported that Schwab will offer fractional shares on equities following the announcement of its move to commission-free trades

Mike Durbin, president of Fidelity Insitutional, recently said at a editors' roundtable that fractional trading may be on Fidelity's roadmap in the future, but would likely be offered to retail clients first before being rolled out to advisors on the platform. 

Fractional-share trading allows for fixed-dollar investments but is also seen as a first step toward direct indexing, which would allow advisors to bypass asset managent firms and invest clients in an indexed portfolio that is customizable, perhaps around tax-harvesting strategies or tailored to a client's enviornmental, governance or social preferences.

IB has been introducing other offerings, too. This past July, IB opened its platform to sports betting to indirectly increase its number of brokerage accounts, the company said during its Q3 earnings call. Its most recent earnings report shows IB had 666,000 customer accounts in the third quarter, a 16% increase from quarter three in 2018. Customer assets on the platform increased by 10% since 2018 Q3 to $156.6 billion. 

IB’s executive vice president of marketing and product development, Steven Sanders, says the company’s latest tool is meant to simplify trading for IBKR Lite users. IB has two types of trading platforms: IBKR Pro, which charges commission on U.S. exchanges listed stocks and ETFs but does not sell order flow in favor of better trade execution, and a "Lite" version that came out in September, which has zero commissions on U.S. stocks and ETFs, but does sell order flow.

“We just viewed it as something that provides more simplification for clients,” said Sanders. “it’s provided there for convenience and utility.”

The fractional shares are available worldwide, but only to individual customers. IB will make it available to advisors in the coming weeks. 

IB has 4,654 advisors and 14,000 "non-registered advisors," what the firm refers to as "friends and family" advisors who manage, trade and report on multiple accounts from a single master account. 

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