HSBC has announced that it is the first global bank to offer an integrated fractional dealing and custody solution for all ETFs listed on the London Stock Exchange.
The firm writes that with the launch of this new HSBC capability, retail investors in the UK will be able to buy and sell fractional ETF shares through participating savings and investment platforms, IFAs, discretionary fund managers or wealth managers.
Adnan Hussain, Global Head of Agency Lending and Liquidity Services at HSBC, says: “While retail investors can already purchase ETFs in real time through a brokerage account on their smartphone, HSBC is further democratising access to the financial markets with a scalable and widespread infrastructure that enables retail investors to trade ETFs in fractional shares.”
ETF orders will be executed on an agency basis through HSBC’s electronic equities trading business, while HSBC will also provide custody for the ETF shares purchased by a wealth platform on behalf of the retail investor.
“We believe the HSBC dealing and custody solution is a key step to unlocking what we see as pent-up demand for ETFs in the UK,” says Matt Kiraly, Global Head of Prime and Securities Services Sales at HSBC. “HSBC can fractionalise and execute an order on-exchange based on best execution principles. If, for example, an investor wants to buy no more than GBP40 worth of ETF units, but that GBP40 does not necessarily equate to a whole number of ETF shares, the investor can instead make the ETF order on a fractionalised basis.”
The firm writes that the UK retail investing market is estimated to be worth GBP2.4 trillion (Platforum research, 2024). There are also around 1.6 million ETF investors in the UK (BlackRock, 2024) – a figure that is equivalent to 8 per cent of all UK investors and is expected to grow significantly in the coming years.
