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What a German start-up has to do with Robin Hood

Here we are not talking about the Robin Hood who takes away the rich people’s money and gives it to the poor. Instead, Robin Hood is a start-up from San Francisco. This FinTech promotes the concept that customers can buy and sell shares without fees. The more than two million users come mainly from the US and Australia.

Previously, the people that wanted to save in Germany had to invest his money with foreign providers. Because even though this is advertised here, in reality, often only account for the custody costs, paid for the actual stock trading anyway.

But when it comes to three founders in Berlin, this should change in the future. The Trade Republic Bank is the first German broker to enable mobile and commission-free trading in equities and ETFs.

Who is this Trade Republic bank?

In 2015, the Berlin-based company was founded by Christian Hecker, Thomas Pischke and Marco Cancellieri. Only since 2019, this year, the start-up has the license as a value-retailer. The Trade Republic Bank enables the purchase and sale of over 6,000 domestic and international stocks, as well as investing in over 250 exchange-traded ETFs daily from 7:30 to 23:00. And all without commission or custody costs. The trader has the choice of whether he would prefer to place a limit order and thus determines the selling or purchase price itself, or to orientate himself to the currently best market price. The whole thing should work with the help of an app and be particularly accessible.

To ensure the smoothest possible process and a high level of security, the Trade Republic Bank works with various service providers. The British bank HSBC takes care of the actual settlement. The Hamburg-based electronic trading system LS-Exchange is responsible for stock market regulation and price monitoring. And Solarisbank manages client funds.

How is Trade Republic financed when the commission is canceled?

For each trading transaction, one euro is due for the customer. That sounds relatively little, and that’s it. Because other online brokers sometimes require 5 to 10 € for a trade.

But another source of income comes through the reimbursement of trading partners. So, if a customer completes a $ 100 trade there, Trade Republic Bank gets a few cents for it.

The start-up also wants to save costs through an automated process, which should differ significantly in its efficiency and effectiveness from classic banks. In addition, Trade Republic hopes for many customers, so that the model of back-financing goes up.

Will the concept of Trade Republic work in the long term?

Still, there is only one waiting list for the app and it is not entirely sure if this strategy will actually work. We are curious to see if commission-free stock trading will soon be successful in Germany as well.

Published inStartups

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