The reason why EU clients are excluded from commission-free trading

M

Maverick2608

The reason Interactive Brokers excludes EU clients from commission-free trading probably is MiFID II:
https://www.hlengage.com/mifid-ii-fca-publishes-dear-ceo-letter-on-payment-for-order-flow

However, it raises a couple of questions:
1) Are existing Schwab clients in the EU not exposed to payment for order flow?
2) Tradestation has confirmed that commission-free trading will apply also to EU clients. Does that mean EU clients at Tradestation will continue to have direct market access - i.e. their orders will not be sold - while at the same get to benefit from commission-free trading?

Additional question:
E-Trade does not have clients in the EU. Are there any Ameritrade clients in the EU?
 
Maverick2608 said:
The reason Interactive Brokers excludes EU clients from commission-free trading probably is MiFID II: ...
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I don't think so. A trade cost a broker nothing, with or without PFOF. So 0 is an arbitrary number. So let's assume that they earn 4 cents on PFOF per 100 shares. Then they can offer EU customers for 4 ct to make the same profit as on a US client. And 4 ct is the same as 0 ct (compared to the old commission of about $5).

Only reasonable explanation (given your statement) is that these brokers don't have infrastructure for DA. However, they can also hire a third party for that (probably their PFOF party will do)...
 
qwerty11 said:
I don't think so. A trade cost a broker nothing, with or without PFOF. So 0 is an arbitrary number. So let's assume that they earn 4 cents on PFOF per 100 shares. Then they can offer EU customers for 4 ct to make the same profit as on a US client. And 4 ct is the same as 0 ct (compared to the old commission of about $5).

Only reasonable explanation (given your statement) is that these brokers don't have infrastructure for DA. However, they can also hire a third party for that (probably their PFOF party will do)...
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1) They do not earn 4 cents per 100 shares. They earn 30 cents (= 0.003 per share), cf. the link below. Including exchange fees that is almost exactly equal to what I pay currently at IB using IB's tiered commission schedule.
https://www.schwab.com/public/schwab/nn/legal_compliance/important_notices/material_aspects.html

2) IB is currently 100% DA.
 
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4 ct was just an example. If they charge 30 ct to EU customers they like that probably much compared to the old $5 to $10.

with "these brokers" I don't mean IB (of course they have the infrastructure) but the likes of E*trade, Schwab, etc.

Lots of people think IB is too complex. For the others you are right (i.e. if 30 ct is charged to EU customers it has no use to do that away from IB).
 
Maverick2608 said:
E-Trade does not have clients in the EU.
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I used to work for a company which offered an employee stock option plan. All employees, including those in Europe, were given an E-Trade account for managing this plan. Company stock would go into this account and the employee could sell the stock once the holding period had expired. E-Trade would inform the company when the employee sold (part of) the stock so that the company could withhold any taxes (depending on the employee's country) from the monthly salary.
 
This is very interesting question. If everything is legitimate with brokers business, I am not sure why would they exclude EU clients. I am not sure what are conditions for commission free trading, but probably MiFID or GDPR might be involved in such decision
 
HobbyTrading said:
I used to work for a company which offered an employee stock option plan. All employees, including those in Europe, were given an E-Trade account for managing this plan. Company stock would go into this account and the employee could sell the stock once the holding period had expired. E-Trade would inform the company when the employee sold (part of) the stock so that the company could withhold any taxes (depending on the employee's country) from the monthly salary.
More...

Most probably the company is considered to be the master account - analogous to the bus construction.
 
Maverick2608 said:
The reason Interactive Brokers excludes EU clients from commission-free trading probably is MiFID II:
https://www.hlengage.com/mifid-ii-fca-publishes-dear-ceo-letter-on-payment-for-order-flow

However, it raises a couple of questions:
1) Are existing Schwab clients in the EU not exposed to payment for order flow?
2) Tradestation has confirmed that commission-free trading will apply also to EU clients. Does that mean EU clients at Tradestation will continue to have direct market access - i.e. their orders will not be sold - while at the same get to benefit from commission-free trading?

Additional question:
E-Trade does not have clients in the EU. Are there any Ameritrade clients in the EU?
More...


Wrong.

https://www.tradestation.com/promo/tsgo/

IMPORTANT INFORMATION:

Only available to U.S. residents. Commission-free equities trading applies to equities trades placed on TradeStation Mobile App or TradeStation Web Trading of up to 10,000 shares; for each order of more than 10,000 shares, a $0.001 per-share charge will be assessed on the number of shares in excess of 10,000. Direct-routed equity orders will be charged an additional $0.005 per share. There will be no base commission for options up to 50 contracts per trade, after which there will be a $0.50 per contract charge. There will be a $1.00 per contract fee for index options. Direct routing options orders incur an additional fee of $1.00 per contract. No option cancellation fees apply. Other fees may apply. See www.tradestation.com/pricing/ for details on these other fees. TSgo is a web and mobile offering, but for a limited time only, TSgo pricing will also be available for trades placed via the TradeStation platform. TSgo pricing is subject to change without notice and is available for non-professional subscribers only.

This was also confirmed via email to me, as I have an account with them.
 
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