A new startup online broker, Loyal3, is offering a commission-free trading service. The company seeks to use social media platforms to make stock ownership cheap and accessible. Loyal3 is focused on allowing investors to easily buy stocks in household consumer brands directly from their website or through Facebook. Investors can purchase as little as $10 in stocks for the top 50 brands on Facebook (even if it means buying fractional shares). So how does Loyal3 cover its trading costs? According to their company website, instead of charging retail investors for commissions, Loyal3 charges the transactions costs for the brands that are traded over its platform. Essentially, it is a form of brand marketing for the companies that pay Loyal3, as people generally shop more with companies that they have a direct ownership in.
Despite the free commissions, Loyal3’s scope is extremely limited, as it only allows investors to only trade shares in a small number of household brands. Individuals can choose to schedule monthly transactions, but can only buy up to $2,500 per stock per month. In addition to the limited stock selection, trades are not executed immediately but are pooled and executed at various times during the day. Also, who knows how long the no-commission is sustainable – other online brokers have dabbled with free stock trading platforms before, include TD Ameritrade with Freetrade.com and Zecco.com.