London-based online stockbroker iDealing is launching commission-free trading for any stocks listed on the Dutch, French, or Belgian Euronext markets.
It makes iDealing the first brokerage in Europe to offer free trading and one of only a handful of companies to do it in the world, with Robin Hood in the US the other notable provider.
iDealing, which has been around since 2000, is able to offer free trading by being lean and mean. The brokerage employs just 17 people and has developed software that can automate and execute as many processes as possible to cut down costs.
Its headcount is in stark contrast to the huge dealing floors that traditionally dominate the City of London.
CEO and founder Lee Foster Bowman told Business Insider: “We’re basically a software house. We wouldn’t be able to do what we do unless we could build a software that allows us to run at this size.”
Small to medium sized brokerages normally rely on third parties for clearing, settlement, and holding of shares, which of course incurs costs. iDealing has bought it all in house to make free trading viable.
Foster Bowman says it “took longer than expected and it was harder than expected,” saying: “To do it today is still quite difficult.”
He says: “When we launched in the UK we launched as a super discount broker. The underlying principle that drove the internet boom is if you develop a system that eliminates error you can pass cost savings on to the customer.”
Foster Bowman says the switch to commission-free trading will have “a very minor effect” on revenues because: “We were charging almost nothing on trades before.”
iDealing will make its money from interest payments on spare client cash and through administration fees for things like wiring out money, processing dividend payments, and corporate actions such as voting on takeovers.
iDealing’s biggest market is the UK and Foster Bowman says they’d like to introduce commission-free trading in London but it’s more difficult in the UK. As well as launching commission-free trading, iDealing on Wednesday launched across the Netherlands and Belgium.