Online brokerage Rakuten Trade has revealed that it be introducing another new feature to enhance its US trading service, namely fractional trading. Set to be rolled out on 15 May, this will make Rakuten Trade the first brokerage in Malaysia to enable such an offering.

Once the feature is live, interested Rakuten Trade customers will be able to buy US stocks, American Depositary Receipts, or US exchange-traded funds (ETFs) in fractions of a share, instead of having to pool enough money to buy a full share. With this reduced entry requirement, it is hoped that both existing and new investors will be further encouraged to participate in online trading.

Chief executive officer of Rakuten Trade, Kazumasa Mise also shared a scenario as to how this upcoming feature will be beneficial to customers. He pointed out that in general, investors on the Rakuten Trade online trading platform are most interested in purchasing Tesla, Apple, Alphabet, and Amazon shares.

“However, to own just one share of Apple, we need to fork out US$165. This is equivalent to about RM700, which just isn’t possible for retail investors with a smaller disposable income. With fractional trading, customers can purchase 0.01 units of Apple shares, which would only cost US$1.65 or about RM7. This may encourage investors to invest in US stocks,” Kazumasa said.

Kazumasa also commented that the decision to introduce fractional trading was made following feedback from existing customers who use Rakuten Trade’s foreign trading service (Rakuten Trade currently allows investors to trade in both the US stock market and the Hong Kong Stock Exchange, enhanced with foreign currency facility). Many of them have highlighted the lack of certain much-desired features, such as fractional trading, short selling, margin trading, and market order execution.

In response, Kazumasa shared that aside from fractional trading, the company currently has no plans to introduce margin trading and short selling for US stocks because these features are more suitable for experienced investors. “About 80% of our customers have less than three years’ experience in stock trading. Additionally, we are targeting investors [who are] just starting out and/or have a smaller disposable income,” he said.

There is a likelihood, however, that Rakuten Trade may consider introducing the market order execution feature, which enables investors to instantly buy or sell shares at the current price. “We are thinking about it right now. We may introduce it this year – I cannot promise, but we will think about it,” said Kazumasa, adding that there are also currently no plans to further expand its foreign trading offerings to more markets as Rakuten Trade would like to focus on improving its US and Hong Kong trading services.

Ultimately, Kazumasa stressed that Rakuten Trade’s key objective is to find ways to empower investors – especially new investors – so that they can invest and trade more conveniently. For instance, it recently lowered its brokerage fees to start from just RM1, as well as revised the structure of its rewards programme.

“We hope that with the fractional share offering for US stocks and lower brokerage fees, it will encourage more investors to set up a brokerage account with us to trade in Bursa or US stocks. Perhaps retail customers of the traditional brokers will continue to use them because our targets are those who are just starting to trade. Also, in Rakuten Trade, there are still some investors who have opened an account but have not yet started trading,” Kazumasa further said.

(Source: The Edge Markets)

• TAGS:
• Digital Brokers
• HK Stocks
• Hong Kong Exchange (HKEX)
• Hong Kong Stocks
• Kazumasa Mise
• Rakuten Trade
• Rakuten Trade Fractional Share Trading
• Rakuten Trade HK Trading Service
• Rakuten Trade US Trading Service
• Share Market
• Stock Market