Brendan Burgess
Founder
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An excellent article in the FT about this.
https://www.ft.com/content/8be69c5e-5f6b-11e9-b285-3acd5d43599e
(or Google
Free trading apps — investment freedom or false economy?)
Apparently Revolut and Freetrade allow people to buy and sell shares for free.
But the problem is that the client might not be getting the best prices.
Interactive Investor says 90 per cent of its deals are executed at better prices than the London Stock Exchange quoted price, due to the network of market makers it uses. Market makers, also known as retail service providers (RSPs), are third parties who facilitate deals for brokers.
These companies are willing to buy and sell stocks at all times, in the hope of profiting from the difference between bid and offer price and could offer a broker a better price than they might elsewhere. But the relationship comes at a cost.
Barclays says that just under 92 per cent of deals placed using its RSPs got a better price quoted than the LSE in the first quarter of 2019, improving customer returns by an average £14.69 over that period.
In contrast, several free trading apps execute customers’ deals in bulk, at the end of the day, which cuts their own costs but means customers miss out on the best price. Freetrade executes customers’ deals at the end of the day. However customers can pay £1 to deal instantly.
Hargreaves said: “Bulk trading is very different from our price improvement service, which polls up to 30 different market makers to get the best price for share deals.”
https://www.ft.com/content/8be69c5e-5f6b-11e9-b285-3acd5d43599e
(or Google
Free trading apps — investment freedom or false economy?)
Apparently Revolut and Freetrade allow people to buy and sell shares for free.
But the problem is that the client might not be getting the best prices.
Interactive Investor says 90 per cent of its deals are executed at better prices than the London Stock Exchange quoted price, due to the network of market makers it uses. Market makers, also known as retail service providers (RSPs), are third parties who facilitate deals for brokers.
These companies are willing to buy and sell stocks at all times, in the hope of profiting from the difference between bid and offer price and could offer a broker a better price than they might elsewhere. But the relationship comes at a cost.
Barclays says that just under 92 per cent of deals placed using its RSPs got a better price quoted than the LSE in the first quarter of 2019, improving customer returns by an average £14.69 over that period.
In contrast, several free trading apps execute customers’ deals in bulk, at the end of the day, which cuts their own costs but means customers miss out on the best price. Freetrade executes customers’ deals at the end of the day. However customers can pay £1 to deal instantly.
Hargreaves said: “Bulk trading is very different from our price improvement service, which polls up to 30 different market makers to get the best price for share deals.”