3 years ago, Interactive Brokers started to allow its customers to trade fractional shares listed on US stock exchanges on their platform.
As long time readers would know, Interactive Brokers is my go-to brokerage platform to hold my stocks and ETFs due to its combination of brand, financial strength, cheap broker fees, and almost spot rate currency conversions.
Fractional shares are shares that are less than a whole number. For example, you can buy 1.32 shares of Apple if you wish to on Interactive Brokers. Typical shares will usually be a whole number such as 1, 5, 8 or 32.
The advantage of fractional shares is that it will allow investors and traders with smaller quantum to start trading and investing and get the amount they want.
For example, if one Apple share is currently $150 and you have $350, you can only buy 2 shares of Apple. With fractional share trading, you can buy 2.3 shares of Apple.
Fractional shares would also be good for advisory firms who have decided to work with Interactive Brokers as they can ensure that almost all their client’s money is fully deployed regardless of the capital size.
For a long while, this is only available to stocks trading on US stock exchanges.
Starting from 1st Jun 2022, Interactive Brokers would allow fractional share trading for European stocks and ETFs.
Fractional shares trading is available on all of Interactive Brokers’ trading platforms including IBKR GlobalTrader, a mobile trading application to trade global stocks. European stocks and ETFs listed on select exchanges, and with average daily volume above $5 million and market cap above $5 billion, are eligible for European fractional shares trading.
For more information, you can read the FAQ over here.
Given the average daily volume and market cap criteria, that would mean a lot of the London Stock Exchange-listed ETFs would not meet these criteria. This is rather disappointing.
However, at the same time, it is not too disappointing for me because I never thought fractional trading is a big deal. You could always accumulate for two months and buy the ETF in one shot if your capital is a small amount.
Even if you are left with $30 not invested, let us not make a big deal over this. You could always add to the capital to invest next month. $30 is not going to compound until $300 in one month to make such a big difference.
Fractional share trading is a good to have but not a major deal-breaker.
How to Enable Global Fractional Shares Trading on Interactive Brokers
Before you can trade fractional shares, you would have to enable something on your trading permissions.
Here is how you can do it.
On your Interactive Broker app, go to the left panel. Under Account Management, you would see Trading Permissions:
Click on that.
If you look under the permissions for stocks, there is an Add button. Click on it. What you want to do is to get Global (Trade in fractions) there like what I had.
At All Global, there is a checkbox Global (Trade in Fractions). Check that.
And click Save.
Once you sign on the electronic form, it will take 1 working day for approval (which means you cannot trade fractional immediately).
Done! Now you can trade fractional shares.
My Comprehensive Interactive Brokers How-to Guides
Interactive Brokers is a great low-cost brokerage platform that can be the standard broker for you to hold your long-term investments. You have access to various exchanges such as Singapore, the US, Hong Kong, London, European and Canada exchanges. Fully digital-first.
To get started or get familiar, you might want to check out some of my past articles on wealth building with Interactive Brokers. I hope it makes your life easier and brighter.
An Easy Step-By-Step Guide to Setup Interactive Brokers (IBKR)
How to Fund & Withdraw Funds from Your Interactive Brokers Account
How to Convert Currencies in Interactive Brokers
How to Buy and Sell Stocks and Securities on Interactive Brokers
How Competitive are Interactive Brokers Commissions Pricing?
Interactive Brokers have Eliminated the US$10 monthly inactivity fee. More details here.
How to Transfer your shares from Standard Chartered Online Trading to Interactive Brokers
How to trade after-hours and premarket
How to create customized reports and automatically send to your email
Send Money from TransferWise to Interactive Brokers
The post Interactive Brokers Now Lets You Trade Fractional European Shares and ETFs (Only if they are Liquid and Big Enough) appeared first on Investment Moats.