Penny stocks are generally higher risk investment tool. For this reason, there are certain brokerage houses that cater to these types of investments. When you’re talking about higher-risk investments like penny stocks, there are usually additional fees involved. This might account for things like foreign company stocks, OTC penny stocks, and any associated trading fees, in general.
But the advent of Robinhood, for example, has sparked a wave of change for an industry that had previously been set in its ways. Founded in 2013, the mobile-first trading app has made it possible to trade penny stocks, blue chip stocks, options, & even cryptocurrency without incurring large fees. With that, we’ve seen other online and mobile-based brokers switch their fee structure dramatically. Whether it’s lower trading fees or no fee trades on certain securities, the move toward bringing more access to the stock market today has been a paradigm shift of sorts.
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Furthermore, this continues the evolution that fintech has seen for a number of decades. It’s funny to think about how dramatically “trading penny stocks” has shifted. Instead of picking up a phone and speaking to someone, you can now do it yourself from your phone. Obviously, thanks to companies like E*Trade, electronic trading has become a well-established way of making money from home. Now we’ve got the next evolution of that which includes making money from your smart phone. It also includes low to no fees when doing so.Penny Stocks & 2020
I speak about penny stocks first, because this is a site obviously focusing on them. However, I also discuss penny stocks because not all brokers allow easy access to them. Furthermore, of the ones that do, certain restrictions may be a factor. Aside from fees, look at penny stocks on Robinhood and Webull, for example.
Generally speaking, users are limited to NYSE and NASDAQ-listed companies. While there are a few exceptions, the vast majority of these penny stocks on Robinhood are listed on major exchanges. But this doesn’t mean that all brokers offering penny stocks aren’t good. In fact, some of the biggest digital trading firms open access to thousands of penny stocks. E*Trade, TDAmeritrade, Fidelity, and Interactive Brokers let users purchase an even wider array of penny stocks compared to Robinhood or Webull.
This year has been a big year for trading and one that the numbers don’t lie. We’ve seen a huge surge in new accounts. While headlines focus on millennials driving that surge toward mobile applications, the fact is, this explosive growth has been realized across most penny stock brokerage houses.Penny Stock Brokers, Consolidation, & The Future For Online Trading
The interesting part about this growth is that it has lead to massive mergers and acquisitions. What began when TDAmeritrade acquired competitor, Scottrade for $4 billion in 2017 has now birthed yet another round of M&A. At the time, Scottrade was an online brokerage firm that served more than 3 million accounts in the U.S. It also had $170 billion in assets under management. You also can’t forget when E*Trade acquired Aperture New Holdings, Inc., the ultimate parent company of OptionsHouse, for $725 million in 2016.
But these deals are chump change compared to what we’ve seen over the past few months. Both E*Trade and TDAmeritrade, the big fish eating Scottrade and OptionsHouse parent, went from predator to prey.Even Bigger Big Buyouts
Charles Schwab (SCHW Stock Report) closed its acquisition of TD Ameritrade Oct. 6 in an all-stock deal valued at $22 billion. “We intend to deliver a winning combination of low costs, great service and industry-leading technology to support our clients, and the advisors who serve them, across every phase of their financial journey,” Walt Bettinger, CEO of Schwab, said in a statement.
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This upped the M&A ante so to speak as it was $7 billion higher than the recently closed E*Trade acquisition. Morgan Stanley (MS Stock Report) closed its $13 billion acquisition of the New York-based discount broker-dealer E*TRADE Financial Corporation in Q4 of 2020. It’s here where some of the details become a bit more skewed based on reporting factors. Since TD and ETrade focused heavily on brokerage accounts, these data were swallowed up by much broader line items in filings of Schwab & Morgan Stanley. But the fact remains, 2020 was a year of exponential growth for trading accountsPenny Stocks Brokerage Accounts & Growth Statistics For 2020
So let’s take a look at some of the user growth for some of the penny stock brokers in 2020. Keep in mind some figures may be a bit different by the time you read this depending on updated information after these two multi-billion dollar acquisitions of E*Trade & TD.Penny Stocks Broker Statistics 2020: Interactive Brokers User Account Growth
Interactive Brokers (IBKR Stock Report) is one of the versatile penny stockbrokers in the market. The firm allows trading of things like Canadian penny stocks as well as penny stocks in the US, options, futures, and more. It also offers a wide range of pricing options. There are tiered, fixed, and free options. In Interactive Brokers, user growth in 2020 has been considerably higher. Though it isn’t as big as a TD/Schwab or Robinhood, it has grown in popularity among a more globally focused userbase:
Accounts as of:
- End of 2019: 690K
- Quarter Ended March 31st: 760K
- Quarter Ended June 30th: 876K
- Quarter Ended Sept 30th: 981K
From the end of 2019 to the end of the quarter ended September 30, 2020, Interactive Brokers saw 42% user growth according to details in its last few filings. Furthermore, the firm reported updated information in October 2020 showing 1.008 million total accounts bringing growth in the first 10 months of 2020 to 46%.Penny Stocks Broker Statistics 2020: E*Trade User Account Growth
E-Trade or E*Trade (Etrade) is another platform for active traders and credited with helping to revolutionize digital trading altogether. It allows access to trading penny stocks on all U.S. exchanges including OTC penny stocks. Users can choose to trade from the website as well as the ETrade Pro platform and mobile applications. The following data was pulled from the most recent ETrade filings however, the subsequent quarterly data for Q3 was wrapped up into revenue figures in Morgan Stanley’s financials. Needless to say, we can clearly see some growth in retail trading accounts in 2020:
Accounts as of
- End of 2019: 7,226,791 (retail 5,169,757 )
- Quarter Ended March 31st: 7,590,005 (retail 5,498,596)
- Quarter Ended June 30th: 7,946,076 (retail 5,825,265)
From the end of 2019 to the end of the quarter ended June 30, 2020, ETrade saw 10% user growth overall and 12.7% user growth in retail accounts according to details in its last few filings.Penny Stocks Broker Statistics 2020: TDAmeritrade/Schwab User Account Growth
Next on this list of penny stock brokers, TD Ameritrade & Charles Schwab, which recently combined. Through a $22 billion deal, the new firm will have control of some housing roughly $6 trillion in combined assets and millions of brokerage accounts. Not only did Schwab more or less double its account total through the deal, it did so on the heels of customer growth at TD in 2020:
Accounts as of
- End of 2019: Funded accounts (end of period) Dec 31st 2019: 12,109,000
- Quarter Ended March 31st: Funded accounts (end of period) 12,671,000
- Quarter Ended June 30th: Funded accounts (end of period) 13,292,000
- Quarter Ended Sept 30th: Funded accounts (end of period) 13,697,000
Accounts as of
- End of 2019: 690,000
- Quarter Ended March 31st: 12.7 million
- Quarter Ended June 30th: 14.1 m end of June 30
- Post TD Acquisition: 28+ million
When you talk about Robinhood, penny stocks are usually going hand-in-hand with the mobile-first broker. New firms have begun establishing themselves with a similar approach, such as Webull. However, Robinhood is cited as being the original no-fee broker. Initially popularized by millennials, it essentially forced the hands of the largest brokers out there when it came to fee structures. It isn’t the most detailed platform when it comes to advanced charting and technical analysis.
However, it fits the basics necessities; mainly buying and selling. There is also access to things like Level 2 and margin if you pay a small monthly fee for Gold access. The Robinhood app has seen significant growth over the last few months. In fact, had it not been for the TD Ameritrade & Schwab combination, Robinhood demonstrated the largest growth among penny stocks brokerage companies.
Though official data is hard to come by for the private firm, there are industry analysts that’ve weighed in on its user growth. In December 2019, Robinhood announced that it had just surpassed 10 million customers. JMP Securities analyst Devin Ryan recently projected that the start-up’s account growth likely added 5 million accounts from the start of 2020 until the end of September.
While some cite users around 13 million, what we can say is that, according to CNBC, Robinhood saw a record 3 million new customers in the first four months of 2020 when the coronavirus pandemic rolled in. Regardless of the figure – 3 million in the first 4 months, 5 million in the first 9 months, or 13 million estimated – Robinhood has seen its user base increase by millions. Compared to other penny stocks brokerage firms experiencing increases in the thousands, I’d say the app is one of the, if not the fastest-growing in 2020.