cancel
Showing results for 
Search instead for 
Did you mean: 
     
Highlighted
Participant ○○○

Fractional share trading at Fidelity is here

The ball is in your court Schwab...

 

FOR IMMEDIATE RELEASE
Corporate Communications (617) 563-5800 fidelitycorporateaffairs@fmr.com
Follow us on Twitter @FidelityNews
Robert Beauregard
(401) 292-7440 robert.beauregard@fmr.com
Nicole Goodnow
(617) 563-3785 nicole.goodnow@fmr.com

FIDELITY SIMPLIFIES INVESTING AGAIN WITH LAUNCH OF REAL-TIME FRACTIONAL SHARES TRADING FOR STOCKS AND ETFS
Investors Can Now Build a Diversified Portfolio of Stocks and ETFs Based on the Dollar Amount They Want to Invest
• New Capability Adds Even More Value to the Industry’s Only Brokerage Platform to Offer $0 Commission Online Trading, Automatic Default to Investment in a Higher Yielding Cash Option and
Quality Trade Execution
BOSTON, Jan. 29, 2020 – Fidelity Investments®, the largest online brokerage firm with more than 23 million retail brokerage accounts, today announced availability of real-time fractional shares trading of stocks and ETFs (also known as dollar-based investing). This simplified way of investing, which is being rolled out to Fidelity’s retail customers beginning today and will continue over the next several weeks, allows investors to trade as little as 0.001 of a share using Fidelity’s Mobile® app for iOS® and AndroidTM.
Fidelity is the only brokerage firm to offer zero online commissions for stock and ETF trades, zero account minimums, zero account fees for retail brokerage accounts, a higher cash sweep rate versus the other largest online brokerage firmsi regardless of investable assets1, and continues to forgo payment-for-order-flow from market makers for stock and ETF trades, helping facilitate industry leading price improvement for customers.
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. Fractional share or dollar-based trades, which must be market or limit order types and are good for the day only, are available in eligible Fidelity retail accounts, including brokerage, HSAs, IRAs, and self- directed brokerage accounts via a workplace retirement plan.
-more-
1 Competitor bank sweep retirement product is eligible for FDIC insurance. Fidelity sweep investment not FDIC insured; may lose value; consider each product carefully.

Fidelity Introduces Fractional Shares and Dollar-Based Trading / Page 2
“Investing at Fidelity just got easier, and more accessible, with dollar-based investing,” said Scott Ignall, head of Fidelity’s retail brokerage business. “Leveraging Fidelity’s award- winning mobile apps and brokerage platform, 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’s size, private structure, and leading positions across various marketplaces (including retail, institutional, and intermediary) are unmatched in our industry and put us in a unique position to deliver greater value to our customers,” continued Ignall. “In addition, customers have access to unmatched stock and ETF research to confirm or generate new investing ideas.”
How Investors May Benefit from Dollar-Based Trading
Based on customer feedback, we expect investors to use dollar-based trading in a variety of ways, including:
• A customer saves $500 to begin investing in several high-priced companies they have been following for their diversified portfolio. With this new capability the price of a single share is not a concern, and the investor buys $100 worth of shares in five different companies, potentially helping with diversification.
• A customer may implement dollar-cost averaging, a strategy in which an investor divides the total amount to be invested across periodic purchases of a stock or ETF to help reduce the impact of volatility. With zero online commissions and the ability to buy in fractional shares or dollars, a customer could set up an automatic deposit from their paycheck or bank account into a Fidelity brokerage account and easily make multiple purchases of a stock or ETF over time, e.g. $50 each month, and pay nothing in commissions.
Dollar-Based Trade Ticket on Fidelity Mobile:
Dollar-based trading will be rolled out on Fidelity Mobile apps for iOS and Android, available in the App Store and on Google Play.

46 Replies
Highlighted
Frequent Contributor

Re: Fractional share trading at Fidelity is here

Tested.

Works in Fido mobile app under "Quick Ticker". Until I noticed a message at the top, it wasn't accepting decimals in regular screen.

On PC, there is a calculator but it rounds to the nearest whole number of shares. If enter in decimals, it says that only whole numbers can be used.

Strange to limit the feature to mobile app for now.

YBB
Highlighted
Frequent Contributor

Re: Fractional share trading at Fidelity is here

This is just plain goofy.  Who will ever SELL a fraction of a share of stock?  Stocks trade on an exchange, where, for every buyer, there has to be a seller.  Not like buying and selling OEFs, which always had fractional share capabilities.

What would make sense is, ifn you wanted to buy, say, $2000 worth of SPY, trading at $326.62 at market close yesterday, Fido would buy 6 whole shares and put $40.28 into your brokerage settlement account, a money market account that holds all cash balances, like the proceeds from the sale of shares, dividends received, and so forth.

 

ElLobo, de la casa de la toro caca grande
0 Kudos
Highlighted
Participant ○○○

Re: Fractional share trading at Fidelity is here


@yogibearbull wrote:

Tested.

Works in Fido mobile app under "Quick Ticker". Until I noticed a message at the top, it wasn't accepting decimals in regular screen.

On PC, there is a calculator but it rounds to the nearest whole number of shares. If enter in decimals, it says that only whole numbers can be used.

Strange to limit the feature to mobile app for now.


YBB - It almost seems like the target audience is millenials that are used to robos which tout frac share capability - and I believe the choice of platform for them is mobile app. I do expect this will expand to all channels and all brokerages shortly.

Highlighted
Participant ○○○

Re: Fractional share trading at Fidelity is here

El,

An advantage of trading fractional shares is it will allow people to buy AMZN and higher PPS stocks for less then their current market price. For example, you can buy a fractional share of AMZN for $100 instead of $1800. 

When was the last time any of the “high flyers” split their stock? I think forcing all companies trading over $100 to split their stock would solve this issue but that is another topic all together..

Highlighted
Frequent Contributor

Re: Fractional share trading at Fidelity is here


@BigTom wrote:

El,

An advantage of trading fractional shares is it will allow people to buy AMZN and higher PPS stocks for less then their current market price. For example, you can buy a fractional share of AMZN for $100 instead of $1800. 

When was the last time any of the “high flyers” split their stock? I think forcing all companies trading over $100 to split their stock would solve this issue but that is another topic all together..


I know what the advantages would be, but, in order to buy a fractional share, someone has to sell the same fraction.  One share of Berkshire Hathaway-A, Warren Buffet's company, closed yesterday at $336,476!  An investor in individual stocks doesn't buy or sell shares of stock of a company directly from the company, like you do whenever you buy/sell shares of an open ended fund, for example, from Fido.

 

 

ElLobo, de la casa de la toro caca grande
0 Kudos
Highlighted
Frequent Contributor

Re: Fractional share trading at Fidelity is here

I think that brokers will buy/sell fractional shares using their inventory and will mark it as principal trade in confirmation.

So, if someone wants to buy 123.456# shares of XYZ, it may be split into 3 trades - 100# round-lot to exchange, 23# to odd-lot dealer and 0.456# from broker inventory marked as principal trade; or the entire 123.456# can be from broker inventory as a principal trade.

IMO, Fido is testing this for its mobile app first and then may roll out to PCs after some experience.

YBB
0 Kudos
Highlighted
Frequent Contributor

Re: Fractional share trading at Fidelity is here


@yogibearbull wrote:

I think that brokers will buy/sell fractional shares using their inventory and will mark it as principal trade in confirmation.

So, if someone wants to buy 123.456# shares of XYZ, it may be split into 3 trades - 100# round-lot to exchange, 23# to odd-lot dealer and 0.456# from broker inventory marked as principal trade; or the entire 123.456# can be from broker inventory as a principal trade.

IMO, Fido is testing this for its mobile app first and then may roll out to PCs after some experience.


I seriously doubt there are many odd lot dealers these days in terms of computer based trading.  And I also doubt that Fido will have shares of 6000 or so stocks traded on the major exchanges, let alone the OTC and pink sheet stuff to handle fractional shares.  It really wouldn't be worth the effort, or cost, to implement this.

On the other hand, I seem to recall that there is one online outfit that allows you to construct your own mutual fund, but I don't know the details whether they allow fractional shares or just odd lots.

Typically, whenever investing in individual stocks and the investor receives a stock dividend, he/she will receive only whole shares, with any fraction paid as cash.

 

ElLobo, de la casa de la toro caca grande
0 Kudos
Highlighted
Frequent Contributor

Re: Fractional share trading at Fidelity is here

Several brokers already offer fractional shares trading. I don't know their implementation details but it has to involve either the broker inventory or the broker has a special deal with a broker-dealer who would it for them. May be such an inventory pool is demand driven.

https://www.thebalance.com/best-brokerages-for-fractional-share-investing-4173377

https://www.investopedia.com/online-brokerage-giant-fidelity-offers-fractional-share-trading-4783430

YBB
0 Kudos
Highlighted
Frequent Contributor

Re: Fractional share trading at Fidelity is here


@yogibearbull wrote:

Several brokers already offer fractional shares trading. I don't know their implementation details but it has to involve either the broker inventory or the broker has a special deal with a broker-dealer who would it for them. May be such an inventory pool is demand driven.

https://www.thebalance.com/best-brokerages-for-fractional-share-investing-4173377

https://www.investopedia.com/online-brokerage-giant-fidelity-offers-fractional-share-trading-4783430


I would be interested in those details, ifn anyone finds out.  Of course, in this day and age of cyber shares, the old paper shares and clipped coupons, for bonds, are long gone!  But, as you say, someone has to hold the fraction of the share that you don't own.  Unless, of course, those shares don't exist, except in the computer of the firm offering it.  Something akin to the UBS 2X leveraged ETNs that I hold, where the shares are traded on an exchange, hence no fractions, but don't represent actual shares of an underlying index, like SDYL, but shares of unsecured debt, issued by UBS.

And I wonder ifn you can buy, say, 3/4 ths. of a share and, once you asset allocation gets out of line, sell off one of those quarters?  8-))

In general, it seems this fractional share concept is an attempt to get those who have never invested in anything but an OEF interested in OTHER 'funds', like CEFs, ETFs, and ETNs and not so much individual stocks.  Ifn you don't think you can afford a whole share of a company, like Boeing, at $318, you're not a serious investor, IMO, H as always.

 

ElLobo, de la casa de la toro caca grande
0 Kudos
Highlighted
Participant ○○○

Re: Fractional share trading at Fidelity is here


@ElLobo wrote:

I know what the advantages would be, but, in order to buy a fractional share, someone has to sell the same fraction.  One share of Berkshire Hathaway-A, Warren Buffet's company, closed yesterday at $336,476!  An investor in individual stocks doesn't buy or sell shares of stock of a company directly from the company, like you do whenever you buy/sell shares of an open ended fund, for example, from Fido.


OK Boomer but you are wrong.
Brokers have to set up structures so that ownership can be pooled, and fractional shares can be credited to different customers. There is no need to 'find' a buyer or a seller that has an order for the EXACT same fraction of a share!!!

Something similar (not exact) happens today with trading 'whole' shares.
If you bought 1,000 shares of stock today for $10, you don't need to find another seller that is selling 1,000 shares at the same price. Your order will be filled with multiple executions to satisfy your order. 

 

 

0 Kudos
Highlighted
Participant ○○○

Re: Fractional share trading at Fidelity is here


@BigTom wrote:

El,

An advantage of trading fractional shares is it will allow people to buy AMZN and higher PPS stocks for less then their current market price. For example, you can buy a fractional share of AMZN for $100 instead of $1800. 

When was the last time any of the “high flyers” split their stock? I think forcing all companies trading over $100 to split their stock would solve this issue but that is another topic all together..


@BigTom 

It is a different subject.  But, from the company's perspective, keeping a stock price high does stop Retail customers from picking your stock to short, which is quite embarrassing as it is widely reported if the number of short sellers is high.  Shorting a high priced stock requires a lot of money and conviction.  And when it doesn't work ... that's how billionaires become millionaires again.   No wonder Elon Musk is dancing.  

ctyankee    

0 Kudos
Highlighted
Frequent Contributor

Re: Fractional share trading at Fidelity is here


@BigTom wrote:

@ElLobo wrote:

I know what the advantages would be, but, in order to buy a fractional share, someone has to sell the same fraction.  One share of Berkshire Hathaway-A, Warren Buffet's company, closed yesterday at $336,476!  An investor in individual stocks doesn't buy or sell shares of stock of a company directly from the company, like you do whenever you buy/sell shares of an open ended fund, for example, from Fido.


OK Boomer but you are wrong.
Brokers have to set up structures so that ownership can be pooled, and fractional shares can be credited to different customers. There is no need to 'find' a buyer or a seller that has an order for the EXACT same fraction of a share!!!

Something similar (not exact) happens today with trading 'whole' shares.
If you bought 1,000 shares of stock today for $10, you don't need to find another seller that is selling 1,000 shares at the same price. Your order will be filled with multiple executions to satisfy your order. 

 

 


Yogi and I already came to this conclusion, Boomer.  In the past, there were two types of traders on the stock market, those that dealt in whole lots (100 share blocks) and those that dealt in odd lots (less than 100).  Today, there's little need for the odd lot guys/gals.  In general, for every buyer, in the market, there has to be one or more sellers.  Ditto in reverse.

In the really old days, actual pieces of paper used to be physically transferred from one brokerage to another, all of them located on, or near, Wall Street.  That was why it took 3 days to settle a trade.  And stocks traded in 1/8ths. increments (up 3/4ers. down 1/8th.)  None of this fraction of a penny that some of my trade confirmations show these days!  8-))

Ditto for buying individual bonds.  I am curious.  Will Fido allow purchase of fractional bonds as well?  At any rate, the paper bond came with actual coupons as part of the bond, where someone, who wanted to spend that interest, 'clipped' a coupon, when it came due, took it to a bank, and received actual cash for it.  I remember doing this with my Grandfather whenever I was a child, back in the early 50's.  I remember 'clipping' a chunk of a piece of paper, giving it to him, receiving a nickle, buying some penny candy with it.

It also seems as if Fido will have to split whatever diveys are paid and received on the whole share, part of which they own, part of which you own.

But there has never been a 'fractional lot' dealer/trader in the market.

My point was that, in OEF land, fractional shares have ALWAYS been around, since the buyer or the seller was Fido, Schwabe, Vanguard, et. al. and the fund company actually 'issued' fractional shares for their funds.

I guess Fido is offering this to attract OEF only investors to their brokerage platforms.  I'd be curious if their current brokerage customers will take advantage of this.  Anyhow, thanks for the OP.

 

ElLobo, de la casa de la toro caca grande
0 Kudos
Highlighted
Participant ○○○

Re: Fractional share trading at Fidelity is here


@ctyankee wrote:

@BigTom wrote:

El,

An advantage of trading fractional shares is it will allow people to buy AMZN and higher PPS stocks for less then their current market price. For example, you can buy a fractional share of AMZN for $100 instead of $1800. 

When was the last time any of the “high flyers” split their stock? I think forcing all companies trading over $100 to split their stock would solve this issue but that is another topic all together..


@BigTom 

It is a different subject.  But, from the company's perspective, keeping a stock price high does stop Retail customers from picking your stock to short, which is quite embarrassing as it is widely reported if the number of short sellers is high.  Shorting a high priced stock requires a lot of money and conviction.  And when it doesn't work ... that's how billionaires become millionaires again.   No wonder Elon Musk is dancing.  

ctyankee    


Not only shorting but going long it's shares too. 
A new retail investor, who has little money, does not have the opportunity to invest in its shares.
A point can be made, new investors and investors with limited funds are being "disenfranchised" by this.

Shorting high flyers is no joke when coming to the amount of funds (or margin) needed and going against the momentum of a stock.
As I am short AMZN and recently TSLA (as of yesterday in after hours)

0 Kudos
Highlighted
Frequent Contributor

Re: Fractional share trading at Fidelity is here

2 things are holding up acceptance of ETFs in 401k/403b.

1. A brokerage window is required.

2. Auto-investing in $/wk or $/mo isn't possible due to whole # of shares requirement.

With fractional share trading, the 2nd issue is solved.

In the long-term, 401k/403b market is the target for these changes.

Current Fido restriction to mobile app is just to do a test drive and gain experience.

YBB
0 Kudos
Highlighted
Participant ○○○

Re: Fractional share trading at Fidelity is here


@yogibearbull wrote:

2 things are holding up acceptance of ETFs in 401k/403b.

1. A brokerage window is required.

2. Auto-investing in $/wk or $/mo isn't possible due to whole # of shares requirement.

With fractional share trading, the 2nd issue is solved.

In the long-term, 401k/403b market is the target for these changes.

Current Fido restriction to mobile app is just to do a test drive and gain experience.


You always make great points with your posts. 

Slightly off topic, did you have to update your Fidelity app to get the fractional trading to work?

0 Kudos
Highlighted
Participant ○○○

Re: Fractional share trading at Fidelity is here


@ElLobo wrote:

@BigTom wrote:

@ElLobo wrote:

I know what the advantages would be, but, in order to buy a fractional share, someone has to sell the same fraction.  One share of Berkshire Hathaway-A, Warren Buffet's company, closed yesterday at $336,476!  An investor in individual stocks doesn't buy or sell shares of stock of a company directly from the company, like you do whenever you buy/sell shares of an open ended fund, for example, from Fido.


OK Boomer but you are wrong.
Brokers have to set up structures so that ownership can be pooled, and fractional shares can be credited to different customers. There is no need to 'find' a buyer or a seller that has an order for the EXACT same fraction of a share!!!

Something similar (not exact) happens today with trading 'whole' shares.
If you bought 1,000 shares of stock today for $10, you don't need to find another seller that is selling 1,000 shares at the same price. Your order will be filled with multiple executions to satisfy your order. 

 

 


snip ...

I guess Fido is offering this to attract OEF only investors to their brokerage platforms.  I'd be curious if their current brokerage customers will take advantage of this.  Anyhow, thanks for the OP.

 


@ElLobo 

I see it quite differently as fractional shares are the gateway to so much more.  For example, for an investment of $10,000, Motif Investing is already offering Direct Indexing of the S&P 500 for free.  Soon they will allow tax-loss harvesting of fractional shares for those 500 stocks.  Depending on the cost of that service (tbd) that will be a game-changer.   Fidelity already offers this service, but the fees are higher than Wealthfront's offering and I think it's a minimum of 100k to use it.   

This is an important growth area for taxable accounts.  As such, wealthy investors are doing this behind the scenes with their wealth management accounts as other large investors haven't even heard of Direct Indexing ... yet.  If Fidelity can grab millennials with assets with these offerings it is important.  If Fidelity can get wealthy investors away from more expensive options for the same service, it's important.  If Fidelity can get money from fast growing ETF assets at BlackRock or State Street over to Direct Indexing/Self Indexing, it's important. 

ctyankee  

0 Kudos
Highlighted
Frequent Contributor

Re: Fractional share trading at Fidelity is here


@BigTom wrote:

@yogibearbull wrote:

2 things are holding up acceptance of ETFs in 401k/403b.

1. A brokerage window is required.

2. Auto-investing in $/wk or $/mo isn't possible due to whole # of shares requirement.

With fractional share trading, the 2nd issue is solved.

In the long-term, 401k/403b market is the target for these changes.

Current Fido restriction to mobile app is just to do a test drive and gain experience.


You always make great points with your posts. 

Slightly off topic, did you have to update your Fidelity app to get the fractional trading to work?


No, but I had to click Quick Ticker at the top - otherwise, it wasn't taking fractional shares in a test order that was cancelled on the last screen.

YBB
0 Kudos
Highlighted
Participant ○○○

Re: Fractional share trading at Fidelity is here


@yogibearbull wrote:

@BigTom wrote:

@yogibearbull wrote:

2 things are holding up acceptance of ETFs in 401k/403b.

1. A brokerage window is required.

2. Auto-investing in $/wk or $/mo isn't possible due to whole # of shares requirement.

With fractional share trading, the 2nd issue is solved.

In the long-term, 401k/403b market is the target for these changes.

Current Fido restriction to mobile app is just to do a test drive and gain experience.


You always make great points with your posts. 

Slightly off topic, did you have to update your Fidelity app to get the fractional trading to work?


No, but I had to click Quick Ticker at the top - otherwise, it wasn't taking fractional shares in a test order that was cancelled on the last screen.


Thanks! It looks like it hasn't been enabled for me yet. 

I can't wait till they change this on their website and allow auto investing in ETFs. 
If i can auto invest x dollar amount monthly into Vanguard ETFs instead of their OEFs with the NAV closing price (buy on close), I will switch from my Vanguard OEFs to ETFs. Some of their OEFs have slightly higher expense ratios than their Admiral shares of their OEFs, some funds have purchase fees and you can avoid Fidos MF trading fees. The ETFs will be fully portable to other brokers too. 

 

0 Kudos
Highlighted
Frequent Contributor

Re: Fractional share trading at Fidelity is here

"I see it quite differently as fractional shares are the gateway to so much more."

Probably so, for an investor who, to date, only invested in OEFs.  For those with brokerage trading experience in individual stocks, CEFs, ETFs, and ETNs, I don't see this feature as being something that offers so much more, but that's just my opinion.  8-))

Two questions.  Can fractional shares be shorted?  Can fractional bonds be purchased?

De gustibus non est disputandum

 

ElLobo, de la casa de la toro caca grande
0 Kudos
Announcements