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Trading 212

Trading 212

Today’s post is about another low-cost stockbroker, Trading 212 – are they better than the UK’s incumbent, Freetrade?

Stake and Robinhood

A few weeks ago, we looked at low-cost stockbrokers Stake and Robinhood, both now in beta-test here in the UK, with full launches planned in a few months.

  • We concluded that neither would dislodge the incumbent, Freetrade, which has been around for almost five years.

Stake’s free tier only includes two free trades per month.

  • After that it’s $5 (£4) per trade, so Freetrade is cheaper at just three trades per month.

There’s no ISA, and the investment universe is limited to US stocks only.

The Unlimited tier costs $108 pa (£82.50 as I write).

  • You would need to make 83 trades a year (7 a month) for Freetrade to cost more.

So this offer is clearly aimed at those who want to punt small amounts at the US market.


I had high hopes for Robinhood, which is very popular in the US.

  • But they’ve ended up porting a sub-set of their US product to the UK, rather than building a UK specific offer.

The bits they have left out (options and ETFs) are the ones that were the most interesting to me.

Here are the key points:

  1. Completely free trades, which are instant rather than batched at 4pm
  2. US stocks only (plus ADRs listed in the US) – no ETFs, options, crypto or UK stocks
  3. No ISA
  4. All transactions in dollars – converted at the mid-market rate with no commissions
  5. Insured under the US scheme rather than the UK one – but with cover up to $500K (and they are “FCA-approved”.
  6. There’s a premium level (called Gold) – in the US this costs $5 a month and gives you margin trading, Level 2 data and research reports.

Robinhood does beat Freetrade for an actively-traded US stock portfolio, if you can put up with the money being held in the US, in dollars.

  • This is a niche product, but I’ll give it a try when it launches.

Whilst researching Robinhood, I came across some positive write-ups for Trading 212.

  • So let’s take a look at their offer.

But first, a reminder of what Freetrade does.

Freetrade

T212 Comparison table

T212 Comparison table

The Trading 212 website has a handy table comparing the features of the service against its rivals:

    • there are unlimited free instant trades
    • UK and US markets (plus some European ones)
    • 2,500 stocks in total
    • no FX fees
    • fractional shares (so targeting small pots)
    • limit orders and stop losses
    • card deposits
    • and a website application (not just a phone app)

Which all sounds very good.

T212 Products

T212 Products

There is also an ISA (free) and a CFD account, neither of which I am interested in personally.

T212 Exchanges

T212 Exchanges

For me, the key issue is protection.

T212 Protection

T212 Protection

Trading 212 are FCA-regulated and offer the full £85K FSCS compensation.

T212 Protection 2

T212 Protection 2

The small print mentions that they are owned by  Bulgarian parent, which will bother some people.

  • But they now style themselves as a London-based fintech firm.

The website has links to press coverage from fairly reputable sources (FT, Telegraph, Independent).

Here’s what I found:

  • Trading 212 was founded in Bulgaria in 2003
  • They have 160 staff, most of whom are developers in Sofia
  • They switched to London after they got regulatory approval in 2014
  • They introduced commission-free trading in 2018

Their business model appears to be to replace diminishing profits from ever-more highly regulated CFDs by building a large client base through free trading.

  • These clients will then be offered chargeable add-ons (such as robo-advice) at a later date.
Conclusions

Trading 212 sounds too good to be true.

  • They are cheaper than DeGiro (effectively free) but with the full FSCS compensation.

I think I will open a small account and try them out for myself.


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Mike Rawson

Mike is the owner of 7 Circles, and a private investor living in London. He has been managing his own money for 35 years, with some success.

Article credit to: https://the7circles.uk/trading-212/