Robinhood's impact on the brokerage space has certainly been profound. Not only has the app caused significant M&A in the industry as brokerages battle to compete with its zero commission gimmick, but now it has enticed brokerages to follow in its footsteps with fractional trading.
And this week, that exactly what Fidelity announced they were doing.
The firm said this week its clients can now trade fractions of stocks and exchange traded funds. The "dollar based trading" option allows individual investors to own any company they want, regardless of the share price, according to CNBC.
For instance, if a client only has $100, it can still purchase fractional shares of a $2000 stock, like Amazon.
Fidelity said in a press release: “Customers can now own a piece of their favorite companies and ETFs based on how much they want to invest, independent of the share price.”
Fidelity currently has $8.3 trillion in client assets and is following in the footsteps of Schwab, who also announced it would offer fractional trading this year. Other companies, like Stockpile, have offered this service for $0.99 per trade.
Robinhood started offering fractional trading in December 2019 and announced that more than 200,000 users were already "in line" for the service within hours of launching it. Robinhood topped 10 million accounts last year, causing bigger names in the industry - like Fidelity - to gun for their client base.
“Fidelity will execute all fractional trades in real-time during market hours, meaning customers will always know the share price, unlike some firms that execute fractional trades at the end of a trading day or wait for multiple orders to add up to full shares,” Fidelity concluded.
Not unlike ETFs themselves, we're sure this will at some point come back to bite the market when it decides to revolt against central bank policy. Until then, these brokerages are more than happy to sell your order flow to the highest bidder.