Robinhood, a highly valued US fintech, has launched in the UK to offer investors commission-free trading in Wall Street and global stocks.
The Silicon Valley-based platforms cut-rate offer helped trigger a price war in the US and so its arrival on these shores could set another fintech cat among the big domestic investment platforms pigeons.
Robinhood, which was valued at more than US$7bn earlier this year, opened for UK registrations on Wednesday, promising British investors the ability to buy and sell over 3,500 overseas stocks without execution fees.
Investing will start from early in the new year, the company said, in what will be its first overseas market.
As well as US stocks such as Alphabet, Amazon, Apple, Netflix, Nike, Snapchat and Tesla, the platform also offers access to another 1,000 global equities that are trade in the US via global depository receipts, such as AstraZeneca, Burberry, Barclays and Shell.
Robinhood UK, which has been authorised and is regulated by the Financial Conduct Authority and offers up to US$500,000 of protection under the SIPC scheme, allows new customers to open an account with just £1 and says it wont charge British customers any foreign-exchange fees.
“We see the opportunity here to bring real value to the market," CEO Wanders Rutger told reporters in London, adding that the aim was to bring a "much more competitive product to existing investors".
Possibility of a price war in the UK?
Launching in the UK with a low-cost offer puts it up against established investment platforms such as FTSE 100 giant Hargreaves Lansdown PLC (LON:HL.) and FTSE 250-listed AJ Bell PLC (LON:AJB), as well as the likes of Interactive Investor, Share plcs (LON:SHRE) Share Centre and leveraged trading platforms like IG Group PLC (LON:IGG) and CMC Markets Plc (LON:CMCX).
A couple of years ago the launch of another US low-cost platform, Vanguard, led to predictions of a price war in fund trading.
Since Robinhoods launch in the States six years ago, other larger firms such as Charles Schwab slashed their fees for trading equities and other securities, pulling in the likes of Fidelity and TD Ameritrade into offering no-fee trades.
So could the arrival of the US challenger in the UK, where London-based Freetrade app has been available since earlier this year, lead to a price war in equity trading?
Financial sector analyst Paul McGinnis at Shore Capital was sanguine about the effect on incumbent UK rivals.
“Im sure there is a market for Robinhood, but not one thats going to be large enough to trouble the big guys [in the UK].
“I havent seen any impact from other low-cost launches, which Hargreaves faced a few years ago from Vanguard, as youve not really seen any sort of impact from that since.”
He felt most existing investors were unlikely to move because of the attractions of their current providers.
“People underestimate that power of convenience that the big platforms offer, with it all in one place. The SIPP and ISA tax wrappers are quite a powerful thing in terms of keeping you relatively loyal to those platforms.