How much does each trade actually cost Freetrade?

Would like to know the answer to this to quantify the “subsidy”.

I imagine it is less for UK trades where my understanding is Invest has direct connectivity, but I could be wrong here.

Would anyone actually know this?

Actually UK trades will be exponentially more than the US trades FT routes via DriveWealth. Cost of settlement into Crest alone will be in the range of 40-70p depending on message(s) in the chain. Staff, data, pipeline cost is then added on top. That makes the UK stuff pretty pricey. US will be cheaper but then there’ll be a monthly fee of £x owed to DW for their services/custody etc


I thought LSE trades cost stockbrokers like 10p to execute, but I might be wrong

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Thank you very much - pretty chunky cost then. Interesting that they are happy to encourage so much individual trades then through total subsidy of this.

Execution might , yes

Settlement is a different matter

So you just have to figure out your question - is it ‘total’ cost, solely execution cost, execution and settlement and custody? And do on… shoving a message down a pipe to the LSE is more like 10p, yes. But that pipe costs too as for the people that monitor it, as do the developers that made it, as does the regulatory burden of owning assets … and so on and so on …

Unfortunately the costs en-route are somewhat variable. So the best answer is ‘quite a lot’ … possibly even more than the £1 fee we used to pay for instant trades. So FT is going to need to recoup these costs somewhere in the future by sheer volume of users and a premium services

With this in mind, what metrics do you think Freetrade would do best to optimize for?

I remember when Monzo would report ‘social media app’ like app interaction as if it was a strong positive, but some people would point out that perhaps performing well in the metrics applicable to the social media space like time spent per day and number of times the app is opened is not as valuable in the banking space.

That being said, if challengers are truly creating a new paradigm then perhaps their success will be measured in different ways to the incumbents.

I can also see why encouraging users to use the app a certain way could help with Plus take up when it is launched if Plus then facilitates use of the app in that way.


No idea. ‘Time spent’ seems applicable here as it ‘could’ indicate likelihood of conversion to a ‘Plus’ subscription.

But, honestly, no idea.

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Presumably total AUM? Or trading volume?

If we are talking about fixed overheads for trading and FT earns only based on volume then to maximize profit you just want large accounts.

I’m guessing account size would be the strongest indicator for subscription services because it represents a smaller relative cost to them, making conversation more likely.

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If they don’t charge a % of portfolio then AUM is less key, no? It indicates market value in the event of a sale, sure. But it doesn’t drive income directly.

Trading volume is a funny one since trading (people, software, services, custody, settlement) fees aren’t truly fixed and in a sense more Free trades equals more loss for FT. So encouraging trading quantity is not entirely key either.

I guess total AUM (and by extension higher cash levels) will be more relevant when rates increase and Freetrade generates revenue from that.

And the 45bps fee for FX convention IF that is greater than the subsidized trading costs.

Considering all of this perhaps it’s paying users (ISAs, Plus, etc.) and infrequent trading?

But if each trade is larger then there is more chance of them recouping the costs.

Hence why volume and AUM could be important metrics because they should suggest larger average trade size (rather than # users or # transactions).

Trade size I do not see as a factor. A £1 trade costs the same as a £10k trade from an FT point of view. The admin of £1 of assets is Theoretically the same as the admin of £1m of the same asset.

The costs are the same but the revenue scales with the 45bps fee.

Ah! Yes. Agreed. But only for the non-GBP trades and FT has quite a wide selection of GBP shares on the LSE that cost significant sums to administer and settle. Perhaps FT need to push the US trading… but in that regard they have no real differentiation with competitors. The FX fee seems to annoy people too. I’m ok with it but still choose to do a lot of my US trading elsewhere.

But I now understand your point. Still not sure I completely agree but I get your train of thought.

I think they would do well to split trades up in the app so we can see each buy individually and how it’s doing (as well as the average). This would help users understand averaging down etc and might make more buys overall.