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by atombender 2291 days ago
M1 is the only one that has full support for fractional share trading, I believe.

Fidelity has started to offer fractional shares, but it has some limitations: Only market and limit orders, only trades through the basic trade ticket in the mobile app, limited to NYSE/NASDAQ stocks, etc. [1] Another thing to watch out for is that fractional shares can't be transferred; they must be liquidated if you want to switch brokers.

Schwab has said they'll be launching fractional shares over the summer.

Note that most brokers already support fractional shares indirectly through DRIP [2], but that's unrelated to trading.

[1] https://www.fidelity.com/trading/fractional-shares

[2] https://www.investopedia.com/terms/d/dividendreinvestmentpla...
1 comments
gnicholas 2291 days ago
> Another thing to watch out for is that fractional shares can't be transferred; they must be liquidated if you want to switch brokers.

What happens if I buy .5 shares of AAPL every week for 53 weeks? Do I have 26 undivided shares that can be transferred and one half-share that has to be liquidated, or do they treat it as 53 half-shares that all must be liquidated?

If the latter, seems like a great way to keep people locked-in. But the former could be a headache for basis reporting, especially if you could transfer to a brokerage that doesn't natively support fractional shares.

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atombender 2291 days ago
I don't know for sure, but I'm pretty sure they're combined behind the scenes. Fractional shares are really abstractions over an underlying instrument. The broker is the actual owner of the shares, and you have an indirect ownership. Among other things, it leads to a situation where you cannot take part of normal shareholder activites such as voting. The broker still needs to keeps records of the cost basis of each fraction you purchased, of course.
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ipqk 2291 days ago
This is generally true of whole shares too – that the brokerage technically owns the shares. And why brokerages will set up proxy voting for shareholder activities.
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perl4ever 2291 days ago
The broker is the "actual" owner of whole shares too, isn't it? You know, "in street name"?
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