Trade Republic is a cost-effective pan-European online broker with 1 million clients and assets exceeding 6 billion Euros, offering unique fractional bond trading.
The platform features 441 euro-denominated bonds, with an average ask yield to maturity of 3.6%.
Fractional trading allows investment in bonds as low as 1 Euro, enhancing affordability and portfolio diversification.
Trade Republic stands out as a remarkably cost-effective option for European individuals looking to invest in European bonds. Notably, it's the only European broker that offers the unique capability to trade fractional bonds, a feature they introduced as recently as September 2023. Additionally, Trade Republic provides access to trading stocks, ETFs, and offers ETF savings plans, fostering a culture of long-term and regular investment.
Trade Republic, a dynamic pan-European online broker based in Germany, boasts an impressive client base of over 1 million and manages assets exceeding 6 billion Euros as of early 2023. Operating under the vigilant supervision of the Federal Bank of Germany and BaFin (Federal Financial Supervisory Authority), it assures a high standard of financial compliance and security.
Founded in Munich in 2015 as Neon Trading within Comdirect Bank's startup incubator, Trade Republic has rapidly grown into a key player in the fintech sector. Although it remains a private company, it has garnered significant venture capital support, raising over $1.2 billion across five funding rounds from renowned investors such as Sequoia, Accel, Project A, Creandum, and Peter Thiel’s Founders Fund. This robust backing underscores its status as one of Germany's most valuable fintech enterprises.
Getting started with Trade Republic is straightforward but exclusive to their mobile app. The broker caters to residents of the following 17 European countries, making it accessible to a broad audience:
To open your account, you'll need just a few essentials: a valid ID (either a passport or an EU identity card), your tax identification number, and bank details. It's important to note that Trade Republic aligns with the SEPA (Single Euro Payments Area) standards, meaning they only accept deposits from accounts within this zone.
The entire process of setting up an account is online and efficient, often completed in just a few hours.
Trade Republic implements several measures to ensure the safety of customer funds:
Deposit Guarantee: Funds in cash accounts are legally protected up to 100 000 Euros per investor through the Deposit Guarantee Schemes (DGS).
Escrow Accounts: Customer funds are stored in escrow accounts with Trade Republic's partner banks, including Solaris SE, J.P. Morgan SE, Citibank Europe plc, and Deutsche Bank. This arrangement ensures customer money is distinct from Trade Republic's own assets.
Member of EdW: Trade Republic's membership in the Compensatory Fund of Securities Trading Companies (EdW) provides added security. It covers liabilities from securities transactions up to 20 000 Euros per investor.
For holding securities, Trade Republic uses the custodian bank HSBC Deutschland, with securities deposited in appropriate facilities in Germany and internationally.
There are currently 441 bonds available for trading on the broker platform.
Below is a breakdown of the available bonds by countries and industries:
Only euro-denominated bonds are available on the platform, no other currencies.
The average ask yield to maturity for the bonds available at the time of writing is 3.6%.
Trade Republic offers the possibility to trade fractions of bonds as low as 1 Euro. Despite the fact that bonds on the platform are usually traded in 1000 Euro size, this feature of the broker allows even better affordability of bond trading and facilitates the goal of building a diversified bond portfolio.
Fractional trading gives the opportunity to invest money in the form of budgets (e.g. 200 Euros) instead of a certain number of bonds.
Fractional trading is managed by Trade Republic by collecting fractions and consolidating them into full bond minimums before buying or selling them together on the marketplace. Fractions cannot be held by custodians, so they are not transferable to other banks/brokers. Of course, the client agreement with Trade Republic assigns ownership of these fractions to you. In the event of the broker's bankruptcy, the fractions will be resold and the amounts will be credited directly to the client's account.
Trade Republic executes all its trades, including bonds, stocks, and ETFs, through Lang & Schwarz Exchange. This is an electronic marketplace that operates under the Hamburg Stock Exchange. For every order directed to this exchange, Trade Republic earns a commission, a practice known as payment for order flow (PFOF).
It's important for investors to be aware that PFOF may create potential conflicts of interest. In some cases, brokers might prioritize these payments over securing the most advantageous trades for their clients. While Trade Republic is known for its low fees, investors should be mindful of the possibility of hidden costs resulting from this PFOF arrangement.
Interestingly, Lang & Schwarz Exchange lists a much larger number of bonds – over 3 000 – indicating that the range of bonds available on Trade Republic's platform has the potential to expand significantly in the future.
In terms of transaction costs, Trade Republic implements a straightforward pricing model, charging a flat fee of 1 Euro per transaction. This fee applies uniformly to all types of instruments traded on their platform, including bonds. Additionally, they do not impose any minimum activity fee, making it a cost-effective choice for various trading activities.
At Trade Republic, uninvested funds in escrow accounts earn interest, a portion of which is shared with clients. Presently, they offer a 4% interest rate on uninvested cash up to 50 000 Euros. This rate is notably competitive, even surpassing many current yields on euro-denominated government bonds. The interest accrued is credited monthly.
Trade Republic's platform is user-friendly and accessible via both mobile and desktop versions. To explore bonds, simply use the search bar, select 'Discover all products,' and then the 'Bonds' tab. Bonds can also be searched by name or ISIN.
The platform provides filters for bond searches, including Tenor, Country of issuer, Industry, and Government/Corporate type.
The bond table displays key information like coupon, maturity, and yield (termed "annual return" by Trade Republic), with pricing data sourced from Lang & Schwarz Exchange.
Clicking on a bond leads to a detailed page offering further analytics, such as duration. Notably, Trade Republic does not display the bid yield, which is calculated based on the bond's selling price.
Trade Republic supports market orders for bonds but not limit orders, meaning transactions execute at the current market price.
The platform's design is straightforward, focusing primarily on very basic portfolio analytics such as current and previous account values and transaction history.
