New cheap dealing platform - Degiro

Blackdog

There is a dealing platform which has been operating in other European countries now available in the UK. Their rates look amazing but I don't know much about them so further research is needed. They say that deals cost £1.75 which undercuts most of the competition if not all. It would be great if this started a price war with some of the existing platforms. It would be fun to see them on the platform comparison tables!
www.degiro.co.uk

jimjames

Someone beat you to it!

https://forums.moneysavingexpert.com/discussion/5259772

Porcupine

jimjames wrote: »

Someone beat you to it!

https://forums.moneysavingexpert.com/discussion/5259772

Replying here as this thread is better named :-P

No ISA, but forex fees of 0.1% - way better than the 1-1.5% from the usual suspects.

Mediocre for funds - EUR7.50 fee+0.1%, and the selection on Euronext can be poor (though if that includes Luxembourg that could be handy).

Reasonable fees for US/developed Euro stocks (single-figures EUR or less).

Looks like it's in a similar market to Interactive Brokers or Rabobank which are already cheaper than typical fund-oriented brokers - needs more work to see how its prices compares.

Porcupine

Been doing some digging. This turned out to be scarier than expected. All my links are in Dutch, but cut and paste the text into Google Translate.

First, there's some bad feedback. It appears the website is a bit clunky - I can live with that. The main issue for me is not showing full details on trades, which means you can't see currency conversions etc.

Next up, it appears you can't change your password (or you couldn't in October, maybe it's changed). They also don't notify you of trades (what if someone hacked into your account?). That starts ringing a faint security alarm bell.

Then I started to dig into the investor compensation strategy. They're FCA registered but passported because they're a Dutch company under the Dutch regulation authorities. Some people don't like the political risk of passporting. I can live with it because I might end up investing in European companies anyway, so there isn't a huge risk there. The Netherlands isn't Cyprus, where I had greater concerns about passporting.

However, I couldn't find any mention of them on the Dutch National Bank (DNB) register regarding their Investor Compensation Scheme. The Beleggerscompensatie, as it's called in Dutch, pays EUR20,000 for failed investment companies. Degiro are on the AFM (Netherlands Authority for the Financial Markets) register, but not the DNB.

This was a bit puzzling, but then I found this Dutch article 'NO ONLINE BROKER INVESTOR COMPENSATION; A NEGLIGIBLE RISK?' that indicates that some 'online brokers' aren't covered by the EUR20,000 compensation. And indeed Degiro's website makes no mention of it. It mentions separation of funds, which would cover them becoming insolvent, but not fraud.

Here's what Google Translate made of the Dutch text of that article:
(translation turns it into two unreadable overlapping columns, I hope I've unmangled it correctly)

UNEQUAL BELEGGERSBESCHER-MING

It follows from the strict conditions that the system is notapplies to all online brokers. Online brokers availableken corresponds license or a certificate of surveillancethesis and may provide investment services are coveredthe investor compensation scheme. Online brokers that are not theredispose of an exemption or exception falllen, do not participate in the investor compensation scheme.Individuals who do not invest in online brokers whoconditions or meet an exemption or exceptionare therefore not entitled to compensation underof the investor compensation scheme. The services that bothtype supply brokers may agree with each other.It is then also possible that for several brokers in exactlythe same financial instruments may be invested. Current regulation is to produce a disparity ininvestor protection. An investor may at two differentloin online brokers diminish same service while heone service enjoys protection and indeed for the otherservice is not. This dichotomy in the protection can be trickyexplain. The disparity can be removed by all online brokers under the investor compensation scheme todrop, regardless of whether the online broker apermit in or under an exception. Having regard tothe growing number of private individuals working with online brokersexplains, in our opinion, such an adaptation of thepresent system desired.

...

RISKS AT AN ONLINE BROKER
An investor walks with an online broker that is not theinvestor compensation scheme take an extra risk than
with a broker who participates well in there. In the case of workingTeal impotence at the online broker to the investor after allnot rely on compensation of € 20,000. This willopposite stand that the transaction may be loweran online broker that does not participate in the scheme. It can therefore very attractive for an investor to thechoosing broker with the lowest price.

The investor notice the difference in protection onlywhen the online broker in payment problemstouched. When choosing a (new) online broker andthe balancing test whether it is important that the onlinebroker is under the investor compensation scheme willInvestor risk of insolvency also likeestimate. Although very difficult, there are some circumstancesconditions in the general management of the online bro-ker to designate the risk of inability to pay greatercan make.

Firstly brings lending financial instrumentsat investors with it an increased risk. A bro-ker is mandatory prior to the correct services,to provide clear and non-misleading information aboutthe lending of financial instruments. Loaning financial instruments is allowed only if the investmentger gives its express consent. This increasemood is achieved in practice by the investoragree to let the terms of the fi nan-cial company. The terms often a provisionincluded which means that the investor gives permissionfor the lending of financial instruments.

The advantage of the loan is that the broker that the financial instruments loan, an interest herereceive. This additional income for the broker make checkingthat the costs for the investors down. After The-len, there are, however, too. The risk that the borrower of thefinancial instruments that can not go back and buythus no longer can supply back. This is also called the 'againstgenpartijrisico called '. If the borrower no longer be describedpayment obligations it has the necessarybroker can overcome this loss itself. If the broker does not thiscan and then goes bankrupt, it is ultimately the investorwhich bears the loss of counterparty risk.

Counterparty risk is often limited by a shortmaturity to handle and collateral from the borrower to printforce. The will of the risk of the financial in-undertaking depend on whether sufficient collateral coverageis requested. In some cases it is evident from the conditionsden of the broker or securities are requested and howgreat coverage thereof. According to the terms ofDeGiro which are received on an ongoing basis securitiesamounting to 104% of the value of the lenteffects. Without similar information about the gehan--related risk of a broker is an outsider the tricky concrete risk of lending financialinstruments to assess.

A second risk factor is increasing the numberKeeping cash with an online broker that does not exist under theshelves compensation scheme falls. Companies that do notbanking license and also have not absolve fi ng forattracting repayable funds from consumers,should not be subject callable attract. Is, therefore,the cash that prior to the making of ainvestment decision is deposited temporarily by onlinebroker invested in a money market fund. These are funds thatinclude investing in short-term bonds. These fundsfunds have low risk and low return.

Before investing in money market funds are strict Regu-demanded. For example, the online broker must separate investmentsso that in case of bankruptcy outside the bankrupt farmersDel fall. For example, this can be done by the funds in a dedicated soft-to bring under foundation. If the stringent requirements neverthe-Despite not applied properly, exists in a bankruptcythe online broker the likelihood that investors have lost moneyis. Investors can not rely in this case on the controlshelves compensation scheme.

If the investor holds the other hand money to abanking, the funds in the account for a sum€ 100,000 covered by the deposit guarantee scheme. Thetherefore for investors who want to hold cashFor more than € 20,000 but less than € 100,000 interest- more advantageous to keep their money in a bank. The investor mustIn that case, incidentally, not too fast count empire. Whenon a bench both the deposit guarantee scheme as the investmentgers compensation scheme applies, will benefitplace under a single system. The investor gets inno means a double benefit.

A NEGLIGIBLE RISK?
Individuals investing with an online broker that does notunder the beleggerscompensatìestelsel is running an extrarisk. If the online broker has payment problems andinvestor compensation scheme is not applicable, hasInvestors are not entitled to compensation of € 20,000, whileThis would have at another online broker. Because aonline broker is not obliged to mention that the investor compensation scheme is not applicable, the risk that the investor is not aware of this risk. As long as the lawsgiver here brings no change and unequal investmentgers protection late existence is to make it to the investorto verify that the risk outweighs the attractive lowtransaction costs. In our opinion, the legislature would thisinequality must raise to protect small(Private) investor and the investor compensation schemeapplication must show to all online brokers

The authors are with BarentsKrantz, a law firm with no obvious connection to other brokers in the Dutch investment sector (I didn't look very hard though), so no obvious axe to grind.

With that, as they say, 'I'm out'.

Porcupine

A couple of other thoughts:

One is that Degiro say they're planning to offer SIPPs and ISAs. Does anyone know whether it's possible to offer those while passported? I can't remember through the various incarnations of passported European banks (ING, Bank of Cyprus, etc) if any of those offered ISAs. If not it would suggest Degiro would have to make a UK FSCS registration.

Also, it might be argued that many investors have more than EUR20,000 so the protection isn't very relevant to them. That's a fair point - though I suspect many more would be within the£50,000 of the UK scheme. However, that they haven't joined a protection scheme available to them (I assume) and there are various other security-related gripes suggests a certain sloppiness of operation. We saw in the DotComUnity case the sloppiness of operations also hid sloppiness of accounting, which is what makes me wary.

alanq

Porcupine wrote: »

One is that Degiro say they're planning to offer SIPPs and ISAs. Does anyone know whether it's possible to offer those while passported?

There doesn't appear to be any issue with a passported bank offering ISAs.

e.g. Triodos
http://www.bankofengland.co.uk/pra/Documents/authorisations/banklist/banklist1505.pdf
https://www.triodos.co.uk/en/personal/ethical-isas/

Archi_Bald

alanq wrote: »

There doesn't appear to be any issue with a passported bank offering ISAs.

An awful lot of people have had serious issues with an FSCS protected ISA outfit.

So the very best of luck with a passported one.

Especially in a Brexit scenario.

Biggles

A poster on TMF reports that "the default account type offers only synthetic positions where they make some of the money from stock lending or netting with their short clients. I don't think they tell you what proportion of your holdings is backed by actual shares. in theory, that makes it a little more fragile in case of fraud or bad management of the lending/netting."

So you don't actually own all your shares. I didn't get that from the signup process but you don't get to access the trading platform until your account is funded.

http://boards.fool.co.uk/i-looked-at-their-euro-offering-some-time-ago-13224508.aspx