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Gotrade

ref: TechCrunch

Overview

Gotrade is an app that lets international users buy fractional shares of U.S. stocks and ETFs.

The startup was founded in 2019. Its app lets users buy fractional shares in NYSE and Nasdaq-traded stocks starting from $1 USD.

Unlike other investment apps offering CFDs (contract for differences), Gotrade's products are fully backed by listed equities.

  • Since Indonesian brokers are not allowed to offer foreign securities within Indonesia, but instead have to offer derivatives of foreign securities, Gotrade partnered with Valbury Asia Futures, the Jakarta Futures Exchange and the Futures Clearing House of Indonesia, which are all overseen by Bappebti, the country’s derivatives regulator, to launch Gotrade Indonesia
  • This allows Gotrade Indonesia to offer a fully backed derivative to give its users market access to U.S. stocks. Funds are sent to the Futures Clearing House, and trades are made through Indonesian financial conglomerate Valbury Group and registered on the Jakarta Futures Exchange
  • Then trades are sent to the Alpaca Securities LLC, a FINRA licensed broker-dealer in the U.S. and executed at the National Best Bid and Offer to adhere to U.S. Securities and Exchange Commission’s regulations
  • This means that when a user trades on Gotrade Indonesia, it results in a contract between them and Valbury. Valbury’s corresponding trade with Alpaca Securities creates a fully hedged position.

Fees

Gotrade does not charge commission on trade, custody, inactivity or dividend fees

Gotrade monetizes by charging a 0.5% to 1.2% foreign exchange fees if users deposit funds in local currency that is converted into U.S. dollars for trading, and interest generated from uninvested cash in brokerage accounts.

Gotrade has withdrawal fee.

Please read carefully the Fee schedules V12 05/2022.

Regulations

Gotrade is a trading name of Gotrade Securities Inc., which is a securities licensee licensed by the Labuan Financial Services Authority.

Gotrade acts as an introducing broker to Alpaca Securities LLC, a U.S. stock brokerage that is regulated by the Financial Industry Regulatory Authority (FINRA) and serves as an intermediary.

  • Alpaca Securities splits its stock inventory into fractions, and Gotrade users can decide how many fractions they want to buy.

Clearing services are provided by Velox Clearing LLC and Vision Financial Markets LLC.

User accounts are protected up to $500,000 by the Securities Investor Protection Corporation (SIPC), and money goes through counterparties regulated in Singapore, like Rapyd, and the United States, including Alpaca and First Republic Bank.

To protect users, Gotrade works only with fully-funded cash accounts without any margin facility.

FINRA and Securities Exchange Commission regulations also mean accounts under $25,000 can only day trade, or buy and sell a security on the same day, up to three times every five trading days.

My thoughts

Read Gotrade Global FAQ docs.

  • This is not a CFD broker 1
  • You own the stocks you bought. While stocks are held in 'street name' under the clearing broker partner of Gotrade, your name are still listed as the real and beneficial owner and have the rights associated with the security such as dividends and voting rights at the company's annual general meeting. 2 3
  • The FAQ docs writes that Gotrade supports Limit Order for a whole share but NOT for fractional shares
  • The "Fractional share disclosure" V03 11/2021 states that
    • a "No Limit Order" policy is applied for fractional shares
    • There may not be voting rights for the fraction of a share owned
    • In some circumstances, dividends on fractional positions may not be processed on your account, if the value of the dividend is too small
    • Fractional shares are not transferable. If you close your account or transfer your account to another firm, the fractional shares held in your account will need to be liquidated. Similarly, Fractional shares cannot be put into certificated form and mailed
Children
  1. How to use Gotrade in Vietnam

Tags

  1. topic.investment

Footnotes

  1. https://intercom.help/heygotrade/en/articles/5977554-are-these-contracts-for-difference-cfds˄

  2. https://intercom.help/heygotrade/en/articles/5977509-why-should-i-switch-to-gotrade-if-i-already-use-another-broker˄

  3. https://intercom.help/heygotrade/en/articles/5977563-do-i-own-the-stocks-i-buy˄

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