Why do most US brokerages not accept EU clients?

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Maverick2608

EU population: 512 million
US population: 327 million

EU GDP: USD 18.8 trillion
US GDP: USD 19.4 trillion

Can you open a new brokerage account as an EU resident:
Fidelity: No
Ameritrade: No
E-Trade: No
Vanguard: No
Ally: No
You Invest by JP Morgan: No
Merrill Edge: No
Charles Schwab: Not currently, except for Germany, UK and Spain

Why not? The answer when you contact the brokerages is: regulation.

MiFID II comes to mind. It does not allow payment for order flow. However, if the brokerages do not have a physical presence in the EU, MiFID II cannot ban payment for order flow as long as EU clients open an account at their own initiative.

So, I still do not understand why all these brokerages do not want to tap a market potentially as big as their current US market?

(I am aware that Interactive Brokers, Tradestation, Lightspeed and TradeZero accept EU clients)
 
I forgot the name but there is a law that regulates US brokers executing US ETFs for European residents. There was a discussion here a while ago where I linked to the regulatory code. Most every US broker refused to participate for no apparent reason (if I recall correctly), unless they have a EU presence which is when they have to abide by EU rules anyway. I guess this is one reason most US brokers don't want to Service EU accounts. But I strongly smell other motivations behind this, foremost pressure by US regulators who want to maintain their monopoly on regulating US brokers.

I agree with you that it is utterly strange that in 2019 US brokers still go the way of least residence. It only tells a clear story that there are plenty enough low hanging fruit out there that are ripe for the picking. Also, US regulators make it virtually impossible for outside brokers to service US accounts. Old habits die hard I guess.


Maverick2608 said:
EU population: 512 million
US population: 327 million

EU GDP: USD 18.8 trillion
US GDP: USD 19.4 trillion

Can you open a new brokerage account as an EU resident:
Fidelity: No
Ameritrade: No
E-Trade: No
Vanguard: No
Ally: No
You Invest by JP Morgan: No
Merrill Edge: No
Charles Schwab: Not currently, except for Germany, UK and Spain

Why not? The answer when you contact the brokerages is: regulation.

MiFID II comes to mind. It does not allow payment for order flow. However, if the brokerages do not have a physical presence in the EU, MiFID II cannot ban payment for order flow as long as EU clients open an account at their own initiative.

So, I still do not understand why all these brokerages do not want to tap a market potentially as big as their current US market?

(I am aware that Interactive Brokers, Tradestation, Lightspeed and TradeZero accept EU clients)
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Do you have an overview if the 8 brokers you mentioned changed their policy? I.e. were EU citizens allowed to open an account there before mifid etc.?
 
(FINRA) Rule 2090 (Know Your Customer) and FINRA Rule 2111 (Suitability)

Overseas customers are more difficult to accurately identify, and monitor. Brokers need to run checks on potential clients (criminal, FICO, including legal and industry checks).

The regulators don't want illicit funds to be brokered and unknown individuals to be trading under an assumed name or through fraudulent entities. Much easier if the whole thing is stateside.

There is also the question of, should the client's account go debit, would there be a viable means to recover the value of assets forwarded to clearing parties on customer's behalf.

There are a lot of regulations. Brokers are not obligated to give all applicants brokering services. Overseas clients pose significantly higher liability risk. US customers are easy relatively speaking.
 
That is exactly what I said, what value did you just add with this post? US brokers refused to sign a EU regulatory document which is why they are not allowed to have European accounts trade US ETFs. This was never protectionism on Europe's part. Check the old thread where I posted the actual regulation and the facts why American brokers refused to sign it. I am too lazy to dig it up.

zdreg said:
PS Europeans cannot trade US ETFs because of regulations. Protectionism is alive and well.
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Surely, trading US listed ETFs constitute only a small part of the profit potential?

"Overseas customers are more difficult to accurately identify, and monitor."
Yes, but again, hardly an argument to give up 512 million potential clients in a developed market?
 
Maverick2608 said:
Yes, but again, hardly an argument to give up 512 million potential clients in a developed market?
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It is kind of crazy yes. But, it allows the EU to develop their own brokerage and banking system for foreign clients. I'm sure it has a lot to do with banking regulations.

Can't EU clients easily set up accounts through UK based brokers? I have only dealt with US based brokerage as an American citizen. I don't know what I would have to do.

IBKR is pretty good.

If you can open an account with them then I would do that. (unless you are in need of specialized market access or commission structure/data feed/execution that they don't have.
 
Real Money said:
It is kind of crazy yes. But, it allows the EU to develop their own brokerage and banking system for foreign clients. I'm sure it has a lot to do with banking regulations.

Can't EU clients easily set up accounts through UK based brokers? I have only dealt with US based brokerage as an American citizen. I don't know what I would have to do.

IBKR is pretty good.

If you can open an account with them then I would do that. (unless you are in need of specialized market access or commission structure/data feed/execution that they don't have.
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I have been with IBKR since the beginning of time and I am very satisfied.

I'm just curious why the brokers listed above would let IBKR have those 512 million potential clients more or less to itself.
 
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