- Review: UstockTrade
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Based in Newton, Mass., Ustocktrade is an alternative trading system (ATS) operating under the motto of “Wall Street to Main Street.” The platform offers peer-to-peer stock trading without the use of an outside broker to facilitate the trade. Instead, Ustocktrade matches buy and sell orders within its own network. By eliminating the use of brokers, Ustocktrade can keep member fees to a low monthly charge of just $1, with $1 trades. In addition, they can also provide faster settlement, enabling investors to get the most favorable price on a security.
The company is a startup, having begun operations in 2015, but the trading platform was launched at the beginning of this year by Tony Weeresinghe, the former head of global development for the London Stock Exchange Group. Weeresinghe is self-funding Ustocktrade.
The Ustock name is derived from “You Stock Trade.” The startup’s trades are limited to stocks listed on U.S. exchanges, and the site is aimed at college students and other novice investors. Users must link their Ustocktrade accounts to their bank accounts.
The company was actually created to provide financial support for The Cainan Foundation, which is a 501(c)(3) tax-exempt organization. The foundation is dedicated to educating some of the world’s most disadvantaged kids. It operates by building self-sustaining boarding schools and provides a first-rate education to vulnerable and disadvantaged children throughout the world.
How Does Ustocktrade Work?
Same Day Trade Settlement — Ustocktrade operates through what it refers to as “T+0.” Securities trades handled by traditional brokers will take up to three days to settle into your account; this is referred to as “T+3.” This can make it difficult if you want to buy and sell multiple stocks on the same day, since your sales proceeds will not be available for three days.
Since Ustocktrade matches trades internally within the network, they can provide same-day settlement at no additional cost — that is T+0. That means any security sales you complete will provide immediate availability of funds to buy new investment positions.
Exchange Traded Notes (ETNs) — These are funds, similar to exchange traded funds (ETFs), in which you purchase shares in debt instruments issued by financial institutions, where performance is linked to the credit rating of that institution as well as a specific index.
Trading Simulator — Ustocktrade enables you to practice trading with zero risk. The trading simulator is free to use, and it provides you with virtual cash to practice investing using real-time market data. This will help you prepare for real-world investing activity without risking any of your own money.
|Stock Trades||$1/monthly + $1/trade|
|Mobile App||Yes — Apple iOS|
- Available investments — Ustocktrade currently permits you to invest in most equity securities listed on U.S. stock exchanges. They also allow you to invest in 92 ETFs, as well as 8 ETNs.
- Account protection — Your Ustocktrade account provides SIPC coverage, which insures your account for up to $500,000, including $250,000 in cash.
- Clearing Agency — Ustocktrade uses Electronic Transaction Clearing Inc. as its clearing agent.
- Maximum Deposit — There is no minimum required. There is, however, a maximum trading limit of $10,000 on any order you buy or sell. The purpose of this is to limit the use of the platform to retail investors, rather than by large, professional investors or by high-frequency traders. As noted above, Ustocktrade is aimed at college students and novice investors.
Ustocktrade fees are as follows:
- Membership Fee: $1 per month
- Trading Fees: $1 per trade to buy or sell (plus all applicable regulatory fees)
- Bank fund transfers (ACH): No fee in or out
- Customer Account Transfer In from another broker (ACAT and Non-ACAT): No fee, though this option is not yet implemented
- Account Transfer Out (ACAT and Non-ACAT) to another broker: $40
- Returned Bank Fund Transfer (ACH Items): $20
Ustocktrade is a platform that involves primarily small investors. However as a network trading platform, it does welcome larger investors who can function as market makers within the network. These market makers are referred to as Superusers.
Superusers help to satisfy the minimum capital requirements for the platform and provide liquidity in securities traded through the trading system. They are expected to fill marketable customer orders if those orders cannot be matched with other investors within the network.
However the possibility exists that Superusers may be unable or unwilling to take the counter side of an investment transaction. This means they are not guarantors of liquidity in any sense of the term. This can mean that investor orders are either not executed or not executed on a timely basis.
As Ustocktrade is still essentially a startup, the platform has just one Superuser — the Ustocktrade chief executive officer. That does present the possibility of interruptions in trading activity. As the platform grows, the expectation is that more investors who qualify as Superusers will participate in the service.
- Very Low Fees — At $1 per month, and $1 per trade, Ustocktrade is probably the lowest-priced investment trading platform available.
- No minimum initial account balance — This is a major advantage to new and small investors.
- Very fast trading — This is as close to real-time trading as it gets for small investors.
- Being part of an investment community — Ustocktrade is a peer-to-peer (P2P) trading platform, which makes users part of a close-knit community.
- Supporting a worthy cause through investing — The proceeds generated on the platform go to funding a very worthy cause.
- Limited Trading — As it's currently configured, Ustocktrade represents a limited investment platform.
- Cannot Transfer Existing Securities — Investments from other brokers will have to be converted to cash before transferring them to Ustocktrade.
- Orders are capped at $10,000 per trade — This limit will effectively exclude large investors.
- Your account must be linked to a bank account — You won't have the option to keep your bank account and investments completely separate, if that's your choice.
- No short-selling or margin trading — In case these interest you, they are not available on the platform.
- Email contact only — No other form of communication is indicated at this time.
- No retirement accounts — Ustocktrade currently permits only regular taxable investment accounts, and no IRAs or similar accounts
- Superusers — Given the closed network nature of the platform, this has the potential to lead to liquidity issues, particularly in volatile markets.
Ustocktrade is an interesting concept, creating a truly community-based investment platform. It may be ideal for new and small investors, as well as early adopters, since the fees are very low and there are no account minimums. However the service will probably be of very limited use to larger, more sophisticated investors.
Ustocktrade is a unique trading platform that may have an outstanding future. It gets high marks for same-day trade settlements, as well as extremely low fees. But as a startup operation there are currently a lot of limitations and open questions.