Fractional shares

What is a fractional share?

A fractional share represents a partial unit (i.e., less than one whole share) of ownership in a share of a security or unit of an Exchange Traded Product (ETP), including Exchange Traded Funds (ETF) and Exchange Traded Notes (ETN).

Can I purchase fractional shares at E*TRADE?

No, but you may acquire them in a few ways; through Automatic Investing, the Dividend Reinvestment Program (DRIP), an employee compensation plan, or through a corporate action, such as a stock split or acquisition. E*TRADE does not currently offer the direct purchase of fractional shares.

Automatic Investing allows you to schedule regular investments into an ETF or mutual fund, which can include fractional amounts of certain holdings.

If you opt into the Dividend Reinvestment Program (DRIP), any dividends your holdings earn are reinvested, increasing your position by fractional amounts. You can opt in at the account level or by holding.

How do I liquidate fractional shares?

You can liquidate fractional shares in your account subject to the following restrictions:

While opening short sell orders with fractional shares are not allowed, you may include a fractional quantity in a closing sell order. If a closing sell order contains fractional shares, the full decimal quantity owned must be included. For example, if you own 100.77 shares, the only decimal quantity you may sell is a number with .77 (i.e., 0.77, 2.77, 50.77, etc.).

• On etrade.com and E*TRADE Mobile, you can enter the desired sell quantity directly on the order ticket. E*TRADE Pro users will be directed to etrade.com to close fractional shares.
• On Power E*TRADE, you must select Fractional shares below the Quantity field to include your fractional quantity in the order. On Power E*TRADE Mobile, you can enter the desired sell quantity directly on the order ticket or choose to close the entire position containing fractional shares.

• You can place a market or limit order if the total share quantity is greater than one (i.e., 2.77, 50.77, etc.). However, if the total share quantity is less than one (i.e., 0.77), you can only place a market order. These orders must be good for the day. Good-till-canceled and Good-til-date orders with fractional shares are not accepted.

• Fractional shares cannot be part of a market-on-open or market-on-close order, a limit-on-open or limit-on-close order, a conditional order, or an option spread order. Additionally, multi-account orders on Power E*TRADE cannot contain fractional quantities.

• Orders containing fractional shares are eligible for execution during the regular trading session only (9:30 AM–4 PM ET, Monday–Friday). Fractional share orders cannot be entered in the extended trading hours sessions.

Please also note that due to industry-wide clearing limitations, fractional shares cannot be transferred outside of E*TRADE. The fractional share portion of your positions need to be liquidated prior to transferring out.

How are liquidating (closing) transactions with fractional shares processed?

E*TRADE acts in a mixed capacity when processing liquidating orders containing fractional shares (as Agent for the whole share components and as Principal for the fractional share component).

When executing full shares alongside fractional shares, you will see an agency print next to a principal print on your trade confirmation and they may be different prices.

When E*TRADE receives a liquidating order containing both whole share and fractional share components, E*TRADE routes the whole share components pursuant to its normal order handling procedures and execute the fractional share component after all whole share components are filled. If the whole share components do not receive full execution, the fractional share component will not execute.

Once the whole share components of the order are executed in their entirety, the fractional share component of the order will execute at the midpoint of the National Best Bid or Offer (NBBO). To determine this midpoint price, E*TRADE takes a snapshot of the NBBO at the time it receives confirmation that all whole share components have been filled.

E*TRADE then executes the fractional share component at the midpoint of the snapshot NBBO. In other words, if you enter a liquidating order containing 100.77 shares, E*TRADE will first route 100 shares for execution. Once it is confirmed that all 100 shares have been executed, we will then take a snapshot of the NBBO and execute the remaining 0.77 shares at the midpoint. As a result, your fractional share component may execute at a higher or lower price from your whole share components.

For liquidating orders containing fractional shares only (i.e., less than one share), the order will execute at the midpoint of the NBBO at the time the order enters E*TRADE's order handling system.

You can liquidate fractional portions of positions in Expert Market securities via ACAT so long as there is a two-sided quote in the market or a last sale price from a transaction in the security recorded within the same or previous trading day as the request. In the event that the fractional portion of a position in an Expert Market security cannot be liquidated via ACAT transfer because the aforementioned pricing conditions are not met, the full account ACAT out request will still be processed with any fractional positions in Expert Market securities remaining in the account after the full account ACAT out has otherwise been completed. You will need to make an additional attempt to ACAT the remaining fractional share component at a later date to liquidate the residual Expert Market fractional position via ACAT, subject to the quote and price conditions described above. You may also attempt to submit a liquidating sell order for the fractional position via etrade.com, subject to other conditions.

How do fractional shares work within corporate actions?

Dividend payments

Dividend payments for fractional shares will be proportionate to the percentage of the shares you own. For example, if you own 100.77 shares and the dividend payment is $1.00 per share, you will receive $100.77.

Please note that shares purchased within the Dividend Reinvestment Program (DRIP) are executed at the end-of-day closing price on the dividend payment date.

Proxy materials and voting rights

If you own fractional shares, you will generally be able to participate in mandatory corporate actions proportionate to your interest, including stock splits, mergers, and spin-offs. Fractional shares, however, are not eligible to participate in voluntary corporate actions such as tender offers and certain rights offerings. In the event of a voluntary corporate action, you will only be able to exercise your voting rights on whole shares.

This information is not exhaustive and additional risks may exist beyond those discussed. Please understand the risks of investing in securities, including possible loss of principal, before you trade.