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Fractional Shares

blog.robinhood.com

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Re: Fractional Shares

#11

Post by meritt »

zymhan wrote: post #2

So, what is the actual "vehicle" with which the shares will be purchased? And is this something that exists outside of Robinhood?

> what is the actual "vehicle" with which the shares will be purchased

They changed the data type on the shares_owned field from int to floating point. That's about it. You never owned the shares in the first place, and their maximum risk is the unallocated fractional amount of 1 share of each affected stock (I do wonder if BRKA is disqualified).

Learn more: https://www.bloomberg.com/opinion/newsletters/2019-10-18/mon...

Re: Fractional Shares

#12

Post by sdinsn »

zymhan wrote: post #10
sdinsn wrote: post #6

Earlier quoted context omitted.

> And is this something that exists outside of Robinhood? Yes, it exists in every other broker. RH is just slow

AFAIK Vanguard doesn't offer anything like this, unless you're buying into a mutual fund.

Vanguard has fractional shares because it supports DRIPs. (Robinhood does not support DRIPs.)

Re: Fractional Shares

#13

Post by gruez »

meritt wrote: post #11
zymhan wrote: post #2

So, what is the actual "vehicle" with which the shares will be purchased? And is this something that exists outside of Robinhood?

> what is the actual "vehicle" with which the shares will be purchased They changed the data type on the shares_owned field from int to floating point. That's about it. You never owned the shares in the first place, and their maximum risk is the unallocated fractional amount of 1 share of each affected stock (I do wonder if BRKA is disqualified). Learn more: https://www.bloomberg.com/opinion/newsletters/2019-10-18/mo…

>They changed the data type on the shares_owned field from int to floating point

probably some sort of decimal type to avoid rounding issues.

Re: Fractional Shares

#14

Post by mushufasa »

FYI, Folio has been offering fractional shares for over a decade. They're terrible at marketing and don't have as slick an app, but they control their full stack down to the DTCC. They cover their traces in patents, so I'm not sure Robinhood is doing the same thing as Folio has battle-tested https://www.folioinvesting.com/folioinvesting/brokerage-feat...

(I do not work for Folio)

Re: Fractional Shares

#15

Post by Animats »

Do you really own anything, or are you just lending money to Robinhood? Does your fractional buy get reported to the transfer agent for the stock? Do you get the annual report? Voting rights?

Re: Fractional Shares

#16

Post by deminature »

meritt wrote: post #11
zymhan wrote: post #2

So, what is the actual "vehicle" with which the shares will be purchased? And is this something that exists outside of Robinhood?

> what is the actual "vehicle" with which the shares will be purchased They changed the data type on the shares_owned field from int to floating point. That's about it. You never owned the shares in the first place, and their maximum risk is the unallocated fractional amount of 1 share of each affected stock (I do wonder if BRKA is disqualified). Learn more: https://www.bloomberg.com/opinion/newsletters/2019-10-18/mo…

Yes, I'm sure implementing this feature was as simple as modifying the ownership column in the database. How are dismissive, unthinking comments like this upvoted?

Re: Fractional Shares

#17

Post by grey-area »

Animats wrote: post #15

Do you really own anything, or are you just lending money to Robinhood? Does your fractional buy get reported to the transfer agent for the stock? Do you get the annual report? Voting rights?

Most retail investors don’t want an annual report or voting rights, nor do they mind if they own the share if the asset they buy tracks it sufficiently well.

Re: Fractional Shares

#18

Post by tempsy »

I'm really curious if this is a legitimate growth driver for brokerages and what % of trading volume is represented by a buyer looking to buy It feels very incremental to me.

It also feels like a feature that is representative of something that would only happen at the "top" of the market.

Re: Fractional Shares

#19

Post by mushufasa »

manacit wrote: post #5
zymhan wrote: post #2

So, what is the actual "vehicle" with which the shares will be purchased? And is this something that exists outside of Robinhood?

It exists outside of Robinhood: - Sofi: https://www.sofi.com/invest/fractional-shares/ - Schwab: https://www.wsj.com/articles/schwab-in-bid-for-younger-clien... I'm not totally sure how it's structured, but I imagine RH "owns" the shares and offers you the corresponding fractional amount of value/dividends, etc.

Folio has been doing it for over a decade (https://www.folioinvesting.com/folioinvesting/brokerage-feat...)

Re: Fractional Shares

#20

Post by grey-area »

zymhan wrote: post #2

So, what is the actual "vehicle" with which the shares will be purchased? And is this something that exists outside of Robinhood?

Freetrade in the UK is planning offering this in the next few months I think.

Fractional shares through DRIP is something else really as you can’t purchase them directly.

I’d be interested to know how it works too, but it could be as simple as the brokerage buys 1 share when you ask for 0.5 then keeps the other half on the books, sells the other half to someone else.

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