Exclusive: XTB to Roll Out Fractional Shares and ETFs in Poland and Spain

Wednesday, 26/04/2023 | 13:46 GMT by Damian Chmiel
  • After a successful launch in Romania, XTB presented fractional shares in other European countries.
  • The broker plans to expand the offering to Spain and Poland in the next few weeks.
Omar Arnaout, CEO of XTB
"We selected those markets where XTB clients invest in ETFs most frequently," said Arnaout.

XTB, a global forex (FX) and contracts for difference (CFDs) broker listed on the Warsaw Stock Exchange (WSE: XTB), has recently announced the expansion of its existing offering to include fractional shares and exchange-traded funds (ETFs).

The new service has already been made available to customers in several European countries, with plans to roll out in more jurisdictions in the second quarter of 2022. XTB confirmed to Finance Magnates that customers in Poland and Spain would soon benefit from the service, most likely in May.

XTB Introduces Fractional Shares in More Countries

According to information shared by XTB's press office, the offering of the fractional shares was first implemented on the company's proprietary platform, xStation, in Romania and this week also in the Czech Republic, Portugal, and Slovakia. Initially, it includes access to investing in fractions of the US shares and European ETFs, with plans to expand into additional markets over time.

Fractional shares allow investors to purchase a portion of a company's stock, or other instruments, significantly lowering the barrier to entry into the market. For example, instead of paying $163 for an Apple share or $320 for a Netflix share, a retail trader can become the owner of a small portion of a single stock and earn proportional profits.

Omar Arnaout, the CEO of XTB, said in a conversation with Finance Magnates that further implementations are proceeding according to plan and should be introduced in two more countries, Poland and Spain, in the next few weeks.

"We are proceeding according to the planned schedule. I can reveal that the introduction of Fractional Shares to two additional markets – Poland and Spain – is just a matter of weeks," XTB's CEO exclusively revealed to Finance Magnates.

Arnaout disclosed that the launch of the service in the Romanian market was an operational test of the new product, and XTB is pleased with the results so far. "The first weeks after introducing fractional shares to our offer can be assessed positively. There is a real interest from investors in this product which is why we are working on expanding the offer to additional countries."

In addition, the CEO of XTB stated that the offering had not been introduced earlier in Poland, one of the broker's largest markets, as the publicly listed company was waiting until it could supplement the fractional shares offering with local stocks, including those from the WSE. Therefore, it can be assumed that Warsaw stocks will soon supplement XTB's fractional shares offering.

"Fractional shares are a response to the needs of the market and the continuously growing interest in investing among increasingly diverse customer groups," Arnaout added. "This product is interesting to both aspiring investors and professional investors."

XTB Sees 215% in 2022 Profits

The Poland-based broker concluded 2022 with a net profit of EUR 163.3 million, which is a remarkable increase of 214.4 percent. Operating revenues reached a record high of EUR 308.1 million, surging from the previous year's EUR 136.7 million. On top of that, the broker reported record-breaking client metrics last year, including both active clients and trading activities.

These exceptional figures were achieved despite a lackluster fourth quarter when revenue fell by nearly 45 percent quarter-over-quarter. Additionally, Q4 profit experienced a decline, coming in 79 percent lower than the previous quarter and 27.1 percent below the corresponding quarter (Q4) of 2021.

Recently, Finance Magnates interviewed the CEO of XTB, who has been leading the broker since March 2017, to discuss the 2022 financial results, the increase in client metrics, and other company developments. The full interview can be found here.

"The fourth quarter of 2022 was an excellent period for XTB from the operational perspective," Aranout told Finance Magnates. "We managed the biggest marketing campaign in the history of the company, onboarding over 50,000 new clients and generating the highest quarterly volume in the history of XTB."

Fractional Shares on the Rise, but ESMA Sees Risks

Although fractional share offerings have gained widespread popularity in recent years and have been introduced by both US brokerage firms and retail brokers, according to the European Securities and Markets Authority (ESMA ), they are associated with excessive risk and the possibility of misleading investors.

As early as the beginning of 2020, Fidelity Investments, a US broker with 23 million customers at the time, launched fractional shares and ETF offerings. However, similar offerings had already emerged a few months earlier due to competition in the US market from companies like Interactive Brokers and Charles Schwab. The well-known app Robinhood, which initiated the widespread trend of zero-commission trading, adopted this new industry practice in late 2019.

During the Covid-19 pandemic, zero-commission trading on fractional shares was introduced by other brokers, including FXCM. In addition, firms like Skilling and BUX adopted the trend in the following months.

However, a month ago, ESMA issued a warning addressing concerns about investor protection related to fractional shares. The announcement emphasized that "derivatives on a fraction of shares" are not equivalent to corporate shares, and as such, companies should not use the term "fractional shares" when promoting these products. In compliance with the obligation to enable clients to comprehend the nature and risks of specific financial instruments reasonably, companies must clarify to investors that they are purchasing a derivative product.

XTB, a global forex (FX) and contracts for difference (CFDs) broker listed on the Warsaw Stock Exchange (WSE: XTB), has recently announced the expansion of its existing offering to include fractional shares and exchange-traded funds (ETFs).

The new service has already been made available to customers in several European countries, with plans to roll out in more jurisdictions in the second quarter of 2022. XTB confirmed to Finance Magnates that customers in Poland and Spain would soon benefit from the service, most likely in May.

XTB Introduces Fractional Shares in More Countries

According to information shared by XTB's press office, the offering of the fractional shares was first implemented on the company's proprietary platform, xStation, in Romania and this week also in the Czech Republic, Portugal, and Slovakia. Initially, it includes access to investing in fractions of the US shares and European ETFs, with plans to expand into additional markets over time.

Fractional shares allow investors to purchase a portion of a company's stock, or other instruments, significantly lowering the barrier to entry into the market. For example, instead of paying $163 for an Apple share or $320 for a Netflix share, a retail trader can become the owner of a small portion of a single stock and earn proportional profits.

Omar Arnaout, the CEO of XTB, said in a conversation with Finance Magnates that further implementations are proceeding according to plan and should be introduced in two more countries, Poland and Spain, in the next few weeks.

"We are proceeding according to the planned schedule. I can reveal that the introduction of Fractional Shares to two additional markets – Poland and Spain – is just a matter of weeks," XTB's CEO exclusively revealed to Finance Magnates.

Arnaout disclosed that the launch of the service in the Romanian market was an operational test of the new product, and XTB is pleased with the results so far. "The first weeks after introducing fractional shares to our offer can be assessed positively. There is a real interest from investors in this product which is why we are working on expanding the offer to additional countries."

In addition, the CEO of XTB stated that the offering had not been introduced earlier in Poland, one of the broker's largest markets, as the publicly listed company was waiting until it could supplement the fractional shares offering with local stocks, including those from the WSE. Therefore, it can be assumed that Warsaw stocks will soon supplement XTB's fractional shares offering.

"Fractional shares are a response to the needs of the market and the continuously growing interest in investing among increasingly diverse customer groups," Arnaout added. "This product is interesting to both aspiring investors and professional investors."

XTB Sees 215% in 2022 Profits

The Poland-based broker concluded 2022 with a net profit of EUR 163.3 million, which is a remarkable increase of 214.4 percent. Operating revenues reached a record high of EUR 308.1 million, surging from the previous year's EUR 136.7 million. On top of that, the broker reported record-breaking client metrics last year, including both active clients and trading activities.

These exceptional figures were achieved despite a lackluster fourth quarter when revenue fell by nearly 45 percent quarter-over-quarter. Additionally, Q4 profit experienced a decline, coming in 79 percent lower than the previous quarter and 27.1 percent below the corresponding quarter (Q4) of 2021.

Recently, Finance Magnates interviewed the CEO of XTB, who has been leading the broker since March 2017, to discuss the 2022 financial results, the increase in client metrics, and other company developments. The full interview can be found here.

"The fourth quarter of 2022 was an excellent period for XTB from the operational perspective," Aranout told Finance Magnates. "We managed the biggest marketing campaign in the history of the company, onboarding over 50,000 new clients and generating the highest quarterly volume in the history of XTB."

Fractional Shares on the Rise, but ESMA Sees Risks

Although fractional share offerings have gained widespread popularity in recent years and have been introduced by both US brokerage firms and retail brokers, according to the European Securities and Markets Authority (ESMA ), they are associated with excessive risk and the possibility of misleading investors.

As early as the beginning of 2020, Fidelity Investments, a US broker with 23 million customers at the time, launched fractional shares and ETF offerings. However, similar offerings had already emerged a few months earlier due to competition in the US market from companies like Interactive Brokers and Charles Schwab. The well-known app Robinhood, which initiated the widespread trend of zero-commission trading, adopted this new industry practice in late 2019.

During the Covid-19 pandemic, zero-commission trading on fractional shares was introduced by other brokers, including FXCM. In addition, firms like Skilling and BUX adopted the trend in the following months.

However, a month ago, ESMA issued a warning addressing concerns about investor protection related to fractional shares. The announcement emphasized that "derivatives on a fraction of shares" are not equivalent to corporate shares, and as such, companies should not use the term "fractional shares" when promoting these products. In compliance with the obligation to enable clients to comprehend the nature and risks of specific financial instruments reasonably, companies must clarify to investors that they are purchasing a derivative product.

About the Author: Damian Chmiel
Damian Chmiel
  • 1588 Articles
  • 36 Followers
About the Author: Damian Chmiel
Damian's adventure with financial markets began at the Cracow University of Economics, where he obtained his MA in finance and accounting. Starting from the retail trader perspective, he collaborated with brokerage houses and financial portals in Poland as an independent editor and content manager. His adventure with Finance Magnates began in 2016, where he is working as a business intelligence analyst.
  • 1588 Articles
  • 36 Followers

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