Execution of orders on fractional shares

Help 👋
1

Good morning,
I would like to open a brokerage account with you and actively trade fractional shares. However, I have some doubts about how such trading works for you and whether my orders will be executed well. Therefore, I have a few questions that I would be grateful for an answer to.

  1. Are these market orders?
    So, for example, if I place an order for EUR 1,000 in the pre-opening phase, it will be converted into some volume for which I will then place a market order and buy it at the market price. In such a situation, if the market price is higher than the one at which I placed the order, I will actually spend more than EUR 1,000. I would like to avoid such a situation, so please tell me how your system works in such a situation.
  2. Can it automatically adjust the volume I buy so that I spend exactly EUR 1,000?
  3. What if I place such an order outside trading hours, for example at night, how will my 1000 Euro be converted into the number of shares/fractional shares? and when I place such an order, what amount will be blocked in my account for this order?
  4. Can I place an order for a specific fractional volume, for example an order for 0.713 shares, or do I have to place an order for a given amount and then the volume will be automatically adjusted?

I’m looking to actively trade fractional shares, so I’d really appreciate if you could clarify the situation.
Kind regards

2

Hi @EricSatan

Welcome to the Freetrade community. :wave:

Firstly, it’s important to note that we only offer fractional trading in US shares. Fractional shares can be held in a GIA or a SIPP (not an ISA).

Depending on the plan you choose, you get access to different order types.

On our Basic plan (£0/month) you can make instant and and batch orders

  • Instant orders will be bought and sold at the market price at the time you place the order. They are only available when the market is open.
  • Batch orders will be bought and sold at the 9:15 AM (EU), 10 AM (UK) and 3 PM (US) prices, respectively. These are only available to place when the market is closed.

(Side note: our Standard and Plus plans include automated order types like limited order, stop loss, triggered order and triggered stop loss.)

Bear in mind that Freetrade accounts are GBP denominated so although I’ve referred to EUR below, it’s just so I can answer your questions using the examples you’ve provided.

1. Are these market orders?
You place an order for EUR 1,000 in the pre-opening phase and it converts to, say, 100 shares. As your order was made when the markets were closed it will execute as a batch order.

If by the time the order executes (9:15 AM as it’s an EU order), the share price has jumped, your order will execute at or below EUR 1,000 - so you will receive less than 100 shares rather than be charged more than EUR 1,000.

On the flip side, if the share price dropped, you could receive more than 100 shares if the total value is within the EUR 1,000 you’ve specified.

2. Can it automatically adjust the volume I buy so that I spend exactly EUR 1,000?
As mentioned earlier, we don’t offer fractional trading for EUR shares so it’s unlikely you will spend exactly EUR 1,000. The order will execute at or below EUR 1,000 depending on the price movement.

3. What if I place such an order outside trading hours…?
If you’ve placed your EUR 1,000 order out of hours, the number of shares it is converted to will be as per the previous day’s closing price. The EUR 1,000 will be held for that order until the next day when it executes.

Once the order completes, the difference between the EUR 1,000 and the execution price will be available in your Freetrade account.

4. Can I place an order for a specific fractional volume, for example an order for 0.713 shares, or do I have to place an order for a given amount and then the volume will be automatically adjusted?
For UK and EUR shares, they are traded in whole shares.

I hope these answers help. For more information, you can also see our order execution policy.

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3

What’s the latest on holding fractional shares in an ISA? It sounded like the government were going to allow this but no updates since.

4

Hi, Thank you for your explanation, I would like to ask more about fractional shares in the US. 1. If I place an order for USD 100 outside trading hours (let’s assume the last market price for such a stock is USD 100), what will happen if the market opens the next day at USD 110? Then I will buy less than one share, for example 0.9 shares for $100? Or will I buy one whole share for $110 and have a negative balance?

5

Your order would be placed to buy $100 worth of the stock (less fees) so you would buy less than one whole share in your example. You would not go into a negative balance.

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6

Ok, thank you and in such a scenario i will buy it exactly at market opening or the cut-off time?

7

If it’s a US order placed when the US market closes this will execute in the batch at 3pm BST each day. You’ll see this when you go to place an order.

8

@acamp

Is it still not allowed in an ISA??

9

Hey :wave:

The government has been working on a draft set of rule changes. We’re expecting draft rules to go out for a short consultation in the summer before the changes are introduced.

I’m not sure still whether the change will come into effect at the start of the new tax year or as soon as the rules are published but we’re keeping a close eye on this and will provide an update as soon as we can.

Best
Alex

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