Key Takeaways
- Margin trading has been introduced in the UK by American trading platform Robinhood, enabling investors to borrow money for larger trades.
- Local stocks are now unavailable, but UK customers can trade US stocks on margin.
- There is a minimum account balance requirement of $2,000 and a range of 5.2% to 6.25% for margin charges.
In the UK, Robinhood has introduced margin trading, which enables clients to borrow money against their current assets in order to increase the size of their trades.
The Financial Conduct Authority (FCA) granted permission for the move, which was made possible four days after Robinhood launched its desktop platform for futures trading.
The high-risk tactic of margin trading enables traders to use borrowed money to increase profits or exacerbate losses.
According to a press release from the company, UK consumers can currently trade US equities using margin, but local stocks are still inaccessible.
The company stated that more options would be available soon, but it did not explain why UK stocks are not included.
For UK customers, Robinhood offers margin rates that range from 5.2% for bigger accounts to 6.25% for sums up to $50,000. To be eligible for the service, you must have at least $2,000 in your account balance.
The Competitive Environment and Other Elements
Since its March 2024 launch in the UK, Robinhood has drawn a sizable user following thanks to its commission-free trading approach. However, it is up against fierce competition from well-known platforms that also provide margin trading, including Interactive Brokers, IG, and Plus500.
Robinhood has launched 24/5 trading capabilities in addition to the new margin trading service, allowing UK investors to trade continuously alongside their U.S. counterparts. The goal of this is to make leveraged markets more accessible to retail traders who previously encountered difficulties.
Additionally, Robinhood has put safeguards in place, like forcing consumers to maintain a $2,000 minimum deposit and opting in for margin accounts.
Following the launch of a securities lending product in the UK in September that enables customers to generate passive income from their stocks, Robinhood has now ventured into margin trading.
