The €1 trade, that magical price point that turned a generation of German savers into investors, is living on borrowed time. When the EU’s Payment for Order Flow (PFOF) ban takes full effect in July 2026, neo-brokers like Trade Republic will need to find roughly one-third of their revenue elsewhere, or watch their business model collapse like a poorly constructed ETF portfolio.
The math is brutal. Trade Republic’s managed assets ballooned to €100 billion in 2024, with PFOF kickbacks representing a third of their income. That’s not pocket change. That’s the difference between profitability and burning through venture capital faster than a Frankfurt banker through expense accounts.
What PFOF Actually Means (And Why You Should Care)
Payment for Order Flow sounds like financial jargon because it is. But here’s what happens in practice: when you buy a share through Trade Republic for that seductive €1 fee, your order doesn’t go directly to the stock exchange. Instead, it gets routed to a market maker like Lang & Schwarz Exchange (Börse Hamburg) or Gettex (Börse München). These firms execute your trade and pocket the spread, the tiny difference between the buy and sell price. Then they send a kickback to your broker, typically €4-5 per trade.
Think of it as a hidden commission. You pay €1, Trade Republic gets €5.50 total per transaction. That €4.50 difference is what keeps the lights on and the app development running. It’s also what the EU has decided represents an "interessenkonflikt" (conflict of interest), because brokers might route orders to whoever pays them most, not whoever gives you the best price.
The European Commission’s concern isn’t entirely theoretical. Broker could indeed be tempted to prioritize payment over price execution. But here’s where the regulator’s logic starts looking like a German tax form, technically correct but missing the bigger picture.
The Bafin Study That Undermines the Entire Argument
Germany’s own Federal Financial Supervisory Authority (Bafin) published research that basically says: slow down, this actually works for small investors. Their analysis of PFOF-relevant trading venues found that retail customers buying less than €2,000 in DAX stocks, or €500 in other securities, got better overall results on PFOF markets than on traditional exchanges.
Why? Because big exchanges charge minimum fees that eat small orders alive. A €100 trade on Xetra might cost more in fixed fees than the PFOF spread costs you. The Bafin concluded that for typical German retail investors, especially those making smaller transactions, the current system delivers better value.
Thorsten Pötzsch, Bafin’s executive director for securities supervision, put it diplomatically: "Before banning PFOF, we supervisors should analyze the effects comprehensively and consider less restrictive regulatory measures." Translation: this ban might hurt the exact people it’s supposed to protect.
How Trade Republic Plans to Survive (And Why It Might Not Work)
Trade Republic isn’t sitting idle. The Berlin-based neo-broker is reportedly working on becoming its own market maker, a move that Scalable Capital already made by creating the European Investor Exchange with the Hannover Stock Exchange. This vertical integration lets them capture the spread themselves rather than paying it to third parties.
But becoming a market maker requires capital, regulatory approval, and expertise that a tech startup doesn’t develop overnight. It’s like a food delivery app deciding to open restaurants. The business models are related but fundamentally different.
Other revenue streams are emerging. Trade Republic recently launched Private Equity access for retail investors, starting at just €1. They’re also pushing interest on cash balances and planning to expand their card business. The Classic Card costs €5, the Mirror Card a whopping €50, because apparently some people will pay premium prices for a metal card that does the same thing as a free one.
Yet these diversification efforts face the same problem: they require customers to accept higher costs or new fees at exactly the moment when competition for price-sensitive German investors is about to explode.
The Fee Structures That Could Replace Your €1 Trades
Industry experts predict several scenarios, none of which involve keeping that magical €1 price point:
Flat-rate subscriptions: Scalable Capital is already testing this, a monthly fee for unlimited trades. For active traders, this could work. For the buy-and-hold crowd that dominates German investing, it’s a tax on inactivity.
Percentage-based fees: Traditional brokers like Comdirect charge 0.25% per trade plus a base fee. On a €10,000 order, that’s €25 plus €4.99, totaling nearly €30. That’s 30 times what Trade Republic charges now. Even if neo-brokers undercut this dramatically, we’re likely looking at €5-10 per trade minimum.
Tiered pricing: Free for ETFs in savings plans (Sparpläne), expensive for individual stock trades. This would push behavior toward passive investing, which isn’t necessarily bad, but it limits choice.
The irony? Higher fees might actually improve investor returns by discouraging overtrading. Professor Michael Grote from Frankfurt School of Finance & Management notes: "Usually, customer profits decrease with frequent trading. If trading happens less often, it could lead to improved overall performance." The PFOF ban might accidentally create better investors by making trades too expensive to impulse-buy meme stocks.
Why German Investors Are Particularly Vulnerable
Germany’s "Aktienkultur" (stock market culture) is, to put it kindly, still in its awkward teenage years. After the dot-com crash scared off a generation, it took until the pandemic for Germans to return to equities. In 2020, 2.7 million new investors entered the market, many through neo-brokers.
This demographic doesn’t have deep pockets. The average trade size on these platforms is small, often under €500. These are precisely the investors who benefit most from PFOF and who will be hurt most by its elimination. A €10 fee on a €100 trade is a 10% loss before the market even opens.
The timing couldn’t be worse. With inflation eating savings, property prices in cities like Munich and Berlin reaching escape velocity, and the Riester-Rente (Riester pension) system showing its age, Germans need affordable investment options more than ever. The PFOF ban arrives like a financial BaFin auditor, well-intentioned but potentially devastating to the underlying business.
The Consolidation Wave Nobody’s Talking About
Here’s the unspoken consequence: market consolidation. Not every neo-broker can afford to become a market maker or build alternative revenue streams. The smaller players, Traders Place, justTrade, Smartbroker, face existential threats.
Their CEOs are putting on brave faces. Ernst Huber of Traders Place says the impact will be "minimal." Thomas Soltau of Smartbroker claims the exact effects "cannot yet be finally assessed." But behind closed doors, they’re running the numbers and they don’t look good.
The likely outcome? Three to four major neo-brokers survive, probably those backed by deep-pocketed investors or traditional banks. Prices rise to €5-10 per trade minimum. The era of experimentation ends, replaced by a stable oligopoly that benefits incumbents more than consumers.
This isn’t theoretical. We’ve seen it in other markets where regulation raised barriers to entry. The result is always less competition, higher prices, and more power for the remaining players. For German investors, that means hidden fees in seemingly free investment products become more common as brokers look for revenue wherever they can find it.
What Smart Investors Should Do Right Now
The July 2026 deadline gives you a window. Use it wisely:
1. Lock in current conditions: If you’re considering opening an account, do it now while the €1 fee still exists. Trade Republic and competitors will likely grandfather existing customers for some period.
2. Reevaluate your trading frequency: If fees jump to €10 per trade, your strategy needs to change. That means fewer, larger trades rather than weekly small purchases. Consider consolidating your monthly ETF purchases into quarterly ones.
3. Compare total costs: Look beyond the trade fee. The realistic investment returns and cost sensitivity article shows how fees compound over time. A €10 fee on a €1,000 monthly investment is 1% lost annually, significant when you’re targeting 6-7% returns.
4. Watch for broker stability: As competition intensifies, weaker players may fold or get acquired. The neobank reliability and customer service risks lesson applies equally to neo-brokers. Don’t keep your entire portfolio with a single provider.
5. Consider traditional brokers: If neo-broker fees rise to €5-10, suddenly Comdirect’s €4.99 plus 0.25% doesn’t look so bad, especially when you factor in better research tools and customer service.
The Bottom Line: A Necessary Evil or Regulatory Overreach?
The PFOF ban reveals the fundamental tension in modern finance: should regulators prioritize transparency and theoretical purity, or practical outcomes for real investors? The EU chose the former, convinced that eliminating conflicts of interest trumps preserving low-cost access.
They’re not entirely wrong. PFOF does create misaligned incentives. Brokers theoretically could route orders to the highest payer rather than the best execution. But in practice, competition between market makers and regulatory oversight has kept this in check, at least for the small trades that dominate German retail investing.
The real winners? Traditional banks and established exchanges like Xetra, who’ve watched their market share erode to upstart competitors. The real losers? The 17% of Germans who finally overcame their historical aversion to stocks, only to face higher barriers just as they started building wealth.
Perhaps the most honest assessment comes from the brokers themselves. Erik Podzuweit, founder of Scalable Capital, admits customers are "primarily horrified by the decision, which obviously isn’t in their interest." But he’s also realistic: "It’s important that we oppose upcoming regulations."
That petition on Change.org has already gathered over 10,000 signatures. It won’t reverse the decision. But it signals something regulators missed: German investors understood the trade-off and accepted it. They preferred cheap, slightly imperfect execution over expensive, theoretically pure trading.
The PFOF ban, like many EU financial regulations, solves a problem that existed mostly on paper while creating real, measurable harm to the broader financial pressures on German households. It’s regulatory theater with a ticket price German investors will pay for years.
Your €1 trade isn’t just dying. It’s being killed by regulators who forgot that the best investment strategy is the one you can actually afford to use.
