Is there a safe, big broker for European stock trading?

[p0box4]

Lynx and Degiro can be cheap too but both of them are Dutch so the deposit protection per client is €20,000 only.

I am also looking at Lynx, seems a very interesting option.
About the protection, i found this on their website (translated via google translate from Dutch to English).

"Your money balance is well protected via LYNX. Since you hold your account through LYNX at IB UK, you are therefore eligible for the protection of the U.K. Financial Services Compensations Scheme (FSCS). This means that your account is protected up to GBP 50,000. For more information about the FSCS, go to www.fscs.org.uk. More information about FSA can be found at www.fsa.gov.uk. This system covers a potential shortcoming or insolvency of the broker and as a matter of course does not cover loss on your securities transactions.

IB UK is part of IB USA. Clients of LYNX therefore also benefit from the protection of the American Securities Investor Protection Corporation (SIPC) and of the British insurer Lloyds through IB USA. The SIPC is the self-regulatory institute for Brokers / Dealer Members in the United States. Almost all Brokers / Dealers in the United States are members of the SIPC. The SIPC will compensate investors who have an account with an affiliated Broker / Dealer in the event of insolvency, bankruptcy or unauthorized actions of that Broker / Dealer. Indemnifying means that the market value of your shares, options, warrants, debt and money balance is protected by insurance up to $ 500,000, of which $ 250,000 is cash (or the equivalent amount in EUR). If the SIPC coverage is not sufficient, Lloyds will insure up to an additional $ 30 million per Client. (of this $ 900,000 cash). This insurance is limited to $ 150 million in total."

 

[p0box4]

In Belgium we also have Bolero, part of KBC bank.

 

[alexanderhu]

In Belgium we also have Bolero, part of KBC bank.

Looks good to me but I don't speak Dutch or French so it's off the table for me.

I am also looking at Lynx, seems a very interesting option.
About the protection, i found this on their website (translated via google translate from Dutch to English).

"Your money balance is well protected via LYNX. Since you hold your account through LYNX at IB UK, you are therefore eligible for the protection of the U.K. Financial Services Compensations Scheme (FSCS). This means that your account is protected up to GBP 50,000. For more information about the FSCS, go to www.fscs.org.uk. More information about FSA can be found at www.fsa.gov.uk. This system covers a potential shortcoming or insolvency of the broker and as a matter of course does not cover loss on your securities transactions.

IB UK is part of IB USA. Clients of LYNX therefore also benefit from the protection of the American Securities Investor Protection Corporation (SIPC) and of the British insurer Lloyds through IB USA. The SIPC is the self-regulatory institute for Brokers / Dealer Members in the United States. Almost all Brokers / Dealers in the United States are members of the SIPC. The SIPC will compensate investors who have an account with an affiliated Broker / Dealer in the event of insolvency, bankruptcy or unauthorized actions of that Broker / Dealer. Indemnifying means that the market value of your shares, options, warrants, debt and money balance is protected by insurance up to $ 500,000, of which $ 250,000 is cash (or the equivalent amount in EUR). If the SIPC coverage is not sufficient, Lloyds will insure up to an additional $ 30 million per Client. (of this $ 900,000 cash). This insurance is limited to $ 150 million in total."

Hmm, interesting. I thought that Lynx is an independent broker but it seems like they're more like ProRealTime (they're are another introducing broker for IB in the EU). Lynx's website is a bit confusing because they're not specific about the deposit protection they offer (here: https://www.lynxbroker.com/software-tools/protection-security/) but ProRealTime is much more specific (here: https://trading.prorealtime.com/en/InteractiveBrokers) and indeed it seems like clients can benefit from the $500,000 deposit protection if IB US goes bust, however if only their British subsidiary files for bankruptcy, then the GBP 50,000 applies and I highly doubt that IB US would bail out its subsidiary if lots of clients assets would be missing. Still, it's indeed good that there is a $0.5 million protection if the parent company defaults.

I'm quite curious where which entity holds the clients' assets if an EU clients opens an account with their British subsidiary. IB US or IB UK? If IB UK serves as a manager and as a legal requirement only and the actual funds are kept with IB US, then it may be even better. However if IB UK, a separate limited company holds the funds, then in my opinion the $0.5 million protection may apply in very limited circumstances only.

 

[p0box4]

Looks good to me but I don't speak Dutch or French so it's off the table for me.


Hmm, interesting. I thought that Lynx is an independent broker but it seems like they're more like ProRealTime (they're are another introducing broker for IB in the EU). Lynx's website is a bit confusing because they're not specific about the deposit protection they offer (here: https://www.lynxbroker.com/software-tools/protection-security/) but ProRealTime is much more specific (here: https://trading.prorealtime.com/en/InteractiveBrokers) and indeed it seems like clients can benefit from the $500,000 deposit protection if IB US goes bust, however if only their British subsidiary files for bankruptcy, then the GBP 50,000 applies and I highly doubt that IB US would bail out its subsidiary if lots of clients assets would be missing. Still, it's indeed good that there is a $0.5 million protection if the parent company defaults.

I'm quite curious where which entity holds the clients' assets if an EU clients opens an account with their British subsidiary. IB US or IB UK? If IB UK serves as a manager and as a legal requirement only and the actual funds are kept with IB US, then it may be even better. However if IB UK, a separate limited company holds the funds, then in my opinion the $0.5 million protection may apply in very limited circumstances only.

Looks like ProRealTrading also is based in the Netherlands so i assume the protection regulation would be the same for both. I am going to contact Lynx to find out if the funds are kept with IB UK or IB US.

 

[dealmaker]

Exactly. Brokers are almost never bailed out but banks was bailed out, that's why I think it may be safer to open an account with a bank rather than with an independent broker. Misuse of clients' assets can happen with well run brokerage companies as well. You may remember MF Global!? On the other hand even when BofA, Citi, Goldman Sach, Merrill Lynch, etc. was about to go bankrupt, they got bailed out, 100%, and therefore their clients were safe. Consequently the deposit protection does matter a lot, especially when it comes to non-giant-bank-owned brokers.

You can buy share certificates directly from the companies you are interested in that way you take no brokerage/ bank risk...

 

[alexanderhu]

You can buy share certificates directly from the companies you are interested in that way you take no brokerage/ bank risk...

Unfortunately it's either not possible or really hard to do. I was trying to find a solution for that but I couldn't find any. The only country so far (that I know of) where every single trade gets registered by a government owned and/or controlled depository is Singapore. Basically when you open a brokerage account with a broker in Singapore then by default, when you purchase stocks on the local exchange, your ownership gets recorded in the independent depository. The only situation if this doesn't happen is if the account holder opted to trust the brokerage company and explicitly asked them to hold his or her shares on behalf of him or her. If you know how to purchase shares on EU exchanges in a way that it gets registered into the depository, then please kindly let me know, because I'd really like to know that.

 

[dealmaker]

Unfortunately it's either not possible or really hard to do. I was trying to find a solution for that but I couldn't find any. The only country so far (that I know of) where every single trade gets registered by a government owned and/or controlled depository is Singapore. Basically when you open a brokerage account with a broker in Singapore then by default, when you purchase stocks on the local exchange, your ownership gets recorded in the independent depository. The only situation if this doesn't happen is if the account holder opted to trust the brokerage company and explicitly asked them to hold his or her shares on behalf of him or her. If you know how to purchase shares on EU exchanges in a way that it gets registered into the depository, then please kindly let me know, because I'd really like to know that.

https://www.thebalance.com/buying-stock-without-a-broker-356075

https://www.barclays.co.uk/smart-investor/investments-explained/shares/certificated-share-dealing/

 

[alexanderhu]

https://www.thebalance.com/buying-stock-without-a-broker-356075

https://www.barclays.co.uk/smart-investor/investments-explained/shares/certificated-share-dealing/

Quote: "Barclays Smart Investor does not offer a certificated share dealing service. Following an extensive review of other providers, we believe The Share Centre offers an established alternative which you may want to consider using to buy and sell share certificates."

The issue is that although legally it should be possible to buy registered shares, in reality you can't find any broker that allows you to do that. They don't want that because they're using your shares for short sellers and for who knows what else.

Also, don't forget that this applies to UK markets. I'm interested in buying shares in EU markets, denominated in EUR.

 

[eastern_warrior]

Quote: "B

The issue is that although legally it should be possible to buy registered shares, in reality you can't find any broker that allows you to do that. They don't want that because they're using your shares for short sellers and for who knows what else.

.

That statement is incorrect if you are fulled paid and not using margin. A broker cannot lend out your shares if you have not agreed for them to do so without your express permission.

The reason brokers are not obtaining and delivering physical share certificates to their clients is because of cost and risk.

 

[alexanderhu]

That statement is incorrect if you are fulled paid and not using margin. A broker cannot lend out your shares if you have not agreed for them to do so without your express permission.

The reason brokers are not obtaining and delivering physical share certificates to their clients is because of cost and risk.

We are not talking about physical certificates. There are two models for dematerialized share ownership:

1; Nominee ownership, this is the most common model, whereby the broker is the legal owner of your share but you're the beneficial owner. If the broker misuses the clients' assets then there is no way to recover them since the broker was the legal owner and they had the opportunity to sell them.

2; The other model is the registered ownership model which is more costly and more complicated but a million times safer, it's not even comparable. This means that you instruct your broker to register your ownership with the central depository. They then register you as the legal owner and the broker may not sell your shares since they're not the legal owner but you are. This is the default in Singapore and therefore in my opinion investing with a Singaporean broker on the Singaporean stock exchange is probably the safest option out there because the broker may not have the option to misuse client assets.

Consequently the reason why brokers like this model is because they can loan your shares to other traders. If you'd register your ownership, then they couldn't do that.