Freetrade is a UK-based investment platform that offers commission-free trading services for stocks and exchange-traded funds (ETFs). Since its launch in 2018, Freetrade has become a popular choice for investors who want to trade without paying high fees. However, many people wonder how Freetrade makes money when it doesn’t charge any commission. In this article, we’ll explore the different ways Freetrade generates revenue.
1. Freetrade Plus
Freetrade offers a premium subscription service called Freetrade Plus, which provides users with additional features and benefits. Freetrade Plus costs £9.99 per month and includes features such as instant trades, limit orders, and more research data. Freetrade makes money from the subscription fees paid by Freetrade Plus users.
2. Interest on Cash Balances
When you deposit money into your Freetrade account, it is held in a segregated account with a partner bank. Freetrade earns interest on these cash balances, which helps to generate revenue. However, it’s worth noting that Freetrade does not offer a cash savings account and the interest earned on your cash balance is likely to be lower than what you could earn with a traditional savings account.
3. Securities Lending
Freetrade also generates revenue by lending out the stocks and ETFs held by its users to other investors. This is known as securities lending and is a common practice in the investment industry. Freetrade earns a fee for lending out these securities, which helps to generate revenue.
4. FX Fees
When you buy or sell a stock or ETF that is denominated in a currency other than GBP, Freetrade charges a foreign exchange (FX) fee. This fee is 0.45% of the trade value and helps to generate revenue for Freetrade. However, Freetrade’s FX fees are lower than those charged by many traditional investment platforms.
5. Referral Program
Freetrade has a referral program that rewards users for inviting their friends to join the platform. When a new user signs up using a referral link, both the new user and the existing user receive a free share worth up to £200. Freetrade generates revenue from the fees it receives for executing the trades when these shares are sold.
6. IPO Access
Freetrade also offers users the opportunity to invest in initial public offerings (IPOs) through its IPO access feature. Freetrade earns a fee for each IPO share allocation, which helps to generate revenue. However, it’s worth noting that IPO access is only available to Freetrade Plus users.
7. Trading Data
Freetrade generates revenue by selling anonymised trading data to institutional investors and hedge funds. This data can be used to gain insights into market trends and investor sentiment. However, Freetrade is committed to protecting its users’ privacy and only sells anonymised data that does not identify individual investors.
In conclusion, Freetrade generates revenue from a variety of sources, including its premium subscription service, interest on cash balances, securities lending, FX fees, referral program, IPO access, and trading data. While Freetrade does not charge any commission for its trading services, it still manages to generate revenue through these different channels. As Freetrade continues to grow and expand its services, it is likely that it will explore new ways to generate revenue and provide value to its users.