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Robinhood announced on Monday that it is introducing margin investing in the U.K., allowing users to borrow cash to enhance their trades. This new option will enable U.K. customers to use their existing asset holdings as collateral to purchase additional securities. The launch of margin trading in the U.K. follows regulatory approval after discussions with the Financial Conduct Authority (FCA).
Margin trading is not common in the U.K., with regulators viewing it as controversial due to the risks involved. Some platforms in the country restrict margin trading to high-net-worth individuals or businesses. Other firms offering margin investing in the U.K. include Interactive Brokers, IG, and CMC Markets.
In addition to margin trading, Robinhood recently introduced a securities lending product in the U.K. This offering allows consumers to earn passive income on Stocks they own, as part of the company’s efforts to expand its market share internationally. The platform is offering competitive Interest rates on margin loans, ranging from 6.25% for loans up to $50,000 to 5.2% for loans of $50 million and above.
Jordan Sinclair, president of Robinhood U.K., highlighted the barriers that many customers face in accessing advanced trading products like margin trading in Britain. He emphasized the company’s goal of breaking down stigmas and barriers to basic investing tools, providing customers with opportunities to diversify and expand their portfolios.
Investing on borrowed cash through margin trading can be a risky strategy, allowing investors to leverage their trades and potentially amplify returns. However, it also carries significant risks, as losses can be substantial if the value of the asset being traded drops. Robinhood has implemented safeguards to ensure that customers do not invest more than they can afford to lose when using margin trading.
Customers seeking to trade on margin must have a minimum of $2,000 cash deposited in their accounts and opt-in to use the product. The platform also offers additional protection for users’ uninvested cash through the U.S.’ Federal Deposit Insurance Corporation. By providing access to margin investing, Robinhood aims to empower customers with more trading options while maintaining a focus on responsible investing practices.
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Emily Jensen, graduated from the London School of Economics and Political Science (LSE) in the UK in 2015 with a degree in Economics. She specializes in financial markets and international trade. After graduating, she worked as an analyst at an investment bank in London, where she developed expertise in global economic trends. She later transitioned into consulting, focusing on fintech ventures and providing insights into global economic developments. Emily is passionate about the intersection of finance and technology and aims to drive innovation in the financial sector.
