Degiro bought out by Flatex

haroldsxxx

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What are the implications for Degiro a/c holders of the proposed merger / buyout by Flatex announced this morning?
Flatex has agreed to buy out Degiro for 250m euro. Flatex is another European broker with a public listing in Germany and with a German banking licence and is regulated by BaFin. Its shares have gone up this morning by c.15-20% so the market clearly thinks that it has done good business acquiring Degiro. This is not surprising: Degiro has nearly twice as many client accounts as Flatex and a broader geographical reach in Europe.
I like Degiro as a low-cost transaction only broker but my one concern has always been about the limited guarantee offered by its Dutch brokerage licence (up to 20k).
I guess that if the Flatex acquisiton concludes, the guarantee will be similar to that of other banks (100k) (?). This would be good of course.
According to BrokerChooser, Flatex has high fees for stocks, forex and ETFs. This suggests that Flatex could try and milk their much expanded clientele with higher fees. This would not be so good.
 
Good point. But I guess there are regulatory guarantees offered to holders of investments - in cases where a firm collapses - and that these vary from member state by member state? My main question is whether Degiro being bought out by a German investment firm with a banking licence strengthens (or weakens) the security of individual Irish investor holdings?
 
The German investor compensation scheme is also limited to 20k.
The main benefit might be having a larger regulated entity, which in theory at least, is subject to greater scrutiny by regulators.
 
Good point. But I guess there are regulatory guarantees offered to holders of investments - in cases where a firm collapses - and that these vary from member state by member state? My main question is whether Degiro being bought out by a German investment firm with a banking licence strengthens (or weakens) the security of individual Irish investor holdings?

No - there are different investor protection schemes. One for banking ("Deposit Protection" - €100k) and one for securities transactions ("Investor Protection" - €20k). It doesn't matter if the parent company is a bank, the question is what service / account have you got. That's the scheme you would qualify for.

The German investor protection scheme is €20k as well
 
Was there not a very comprehensive discussion on this topic of investment brokers going bust, the consensus was that stocks held in custody accounts are not the property of the broker and therefore cannot be liquidated by a liquidator. In any case are not stocks in degiro held by a secondary entity and not be degiro itself
 
Was there not a very comprehensive discussion on this topic of investment brokers going bust, the consensus was that stocks held in custody accounts are not the property of the broker and therefore cannot be liquidated by a liquidator. In any case are not stocks in degiro held by a secondary entity and not be degiro itself

Yeah that's the difference - I think I may have discussed on a Revolut thread - if you are banking with an entity, you have full exposure to that entity (i.e. on their balance sheet) but with a non-bank (i.e. an investment firm) or with non-cash assets, other protections apply relating to safe-guarding of client assets. So securities should be segregated from the firm's own assets / liabilities and therefore the cash protection element is smaller
 
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