US low-cost online broker to open Dublin office

US low-cost trader Interactive Brokers is set to open a Dublin office as it restructures its European offering ahead of the UK’s final departure from the European Union. The move will see EU customers migrated to the new Irish entity, meaning a diminution in their insurance protection.

Established in 1978, Interactive Brokers is one of the largest US discount brokers, with many Irish-based customers accessing the platform through the broker’s UK platform for its competitively priced trading options. As it prepares for the end of the Brexit transition period however, of December 31st 2020, the company has decided to set up an Irish operation to serve its EU-based customers.

Over the coming months, the company expects that the majority of its clients based in western Europe will be migrated to this new Irish entity, Interactive Brokers Ireland Limited. The company intends to establish a sizeable presence in Ireland and is currently hiring for a range of roles in its new office, including areas such as financial regulation, governance and anti-money laundering.

Irish customers affected

While Interactive Brokers declined to say how many Irish customers will be affected by the move, the online broker has been a popular service for some time for Irish customers looking to access low-cost trading. However, these customers will now see a diminution in the level of protection available in the event of a default by the broker, as the EU insurance regime is less favourable than those of the UK or US.

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Under the firm’s previous structure, which involved a UK-regulated entity, Irish customers could have been expected to be protected by up to £50,000 (€54,797) under the UK Financial Services Compensation Scheme, while in the US,investors could have been protected by up to $500,000 (subject to a cash limit of $250,000).

In the EU however, in the event of a default of a stockbroker customers may be entitled to claim compensation up to a maximum of just €20,000. In the Republic, a broker is covered under the Investor Compensation Scheme, which may offer investors 90 per cent of the money they have lost, up to a maximum of €20,000.

Interactive Brokers said the migration to Ireland “will have no impact upon the overall safety and soundness of clients’ assets”, noting that the group has an overall capitalisation of some $8.2 billion and is subject to a strong regulatory regime around the world.