An online broker has started $0 brokerage for buying ASX shares.
CMC Markets announced Wednesday that purchases of Australian shares under $1,000 would now attract zero fees.
The offer applies for the first transaction per stock per trading day, and also includes CBoe Australia-listed (formerly Chi-X) shares.
CMC had already offered zero brokerage on buying and selling US, Canadian, UK and Japanese equities for more than a year now. But this week is the first time it is doing the same for ASX shares.
Zero brokerage is a much rarer feature on Australian shares than in the US, where brands like Robinhood Markets Inc (NASDAQ: HOOD) have made it a default for most online brokers.
There is a technical explanation for this. In the US, multiple competing exchanges pay for order flow, allowing brokers to live off the rebates.
But in Australia, ASX Ltd (ASX: ASX) has no need to pay for liquidity as it’s the only game in town.
“In Australia you’ve got a monopoly,” Stake chief Matt Leibowitz told The Motley Fool in 2020.
“The ASX is actually charging a per-trade fee, regardless if you make or take liquidity.”
It is suspected CMC Markets is losing using the $0 brokerage on ASX shares as a loss leader to attract customers.
The Motley Fool has requested CMC Markets to confirm.
Young investors want $0 brokerage
According to CMC Markets Asia-Pacific head Matt Lewis, $0 brokerage on ASX shares were aimed at generation Z and millennial investors who had flooded into the market in recent times.
“Over the last few years record-low interest rates have led to an inflow of Australians looking to enter the stock market including new demographics and younger investors,” he said.
“The knock-on effect has been a significant increase in ETF trading as younger investors look for simple ways to diversify their portfolio in a cost-effective way.”
The normal fee on CMC Markets for transactions of ASX shares is $11 or 0.1%, whichever is greater.
This brokerage still applies on sell orders, as well as from the second buy order onwards per stock per trading day.
Customers are warned that orders placed after market close will be counted as a transaction on the next trading day, which could affect the way the $0 brokerage is dished out.
CMC Markets operates on a direct ownership model. This is different to some other budget platforms like Sharesies and Superhero, which uses a custodianship model to offer low fees.
The post Finally: Here’s how you can buy ASX shares with $0 brokerage appeared first on The Motley Fool Australia.
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