- B2B API platform DriveWealth has bought incumbent broker Cuttone & Company to bring institutional-grade trading services to retail investors.
- This move will enhance its value proposition among fintechs.
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The US-based API platform has purchased institutional broker-dealer Cuttone & Company, per its press release. DriveWealth provides fintechs, financial institutions (FIs), and global brands with the underlying infrastructure to offer real-time access to fractional share trading.
Its current partners include MoneyLion, Stake, and Revolut. With Cuttone & Company, now the Institutional Division of DriveWealth Holdings, the platform can offer its client retail investors access to the point-of-sale for NYSE securities, a feature previously only accessible to institutional investors.
DriveWealth experienced strong 2020 growth thanks to the surge in fractional share trading, funding its war chest to pursue the acquisition. Fractional share trading allows customers exposure to companies they might not typically be able to afford whole shares in, such as Tesla or Amazon. Both fintechs and legacy brokerage firms have adopted the feature in the past year to attract the growing retail investor base, such as Charles Schwab last May.
This fueled demand for DriveWealth's API: Total accounts were up 275% over 2019. Additionally, the average number of trades per its clients' user accounts via its platform was 29 trades in 2020, up from 24 trades in 2019. By contrast, this was 18 for TD Ameritrade, 15.3 for Schwab, and 10.1 for E-Trade. In addition, DriveWealth raised $56.7 million in Series C funding last October, which it stated would in part be used to make acquisitions.
These events thus created the perfect conditions for DriveWealth to acquire Cuttone & Company, which offers full-service brokerage solutions to its institutional customer base including asset managers, hedge funds, professional traders, and other broker dealers.
With the acquisition, DriveWealth can further blur the lines between institutional and fintech brokers, enhancing its value proposition. Fintechs can now leverage DriveWealth's platform to offer retail investors access to institutional-level trading services.
In addition to direct access to NYSE securities' point-of-sale, DriveWealth can share Cuttone's deeper market and regulatory expertise with its clients: Previously, institutional brokers present on the trading floor had the advantage over fintech trading apps, as they were the first to hear of regulatory and jurisdictional information that could affect market conditions or trigger trading halts. Now, DriveWealth can help put fintechs on similar footing as incumbents, making its platform a more attractive offering that will likely accelerate partnership opportunities in 2021.
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