One of the objectives of the single market in the European Union is to make it easier for companies to offer their services in other member countries without undue burdensome regulation. In the financial arena, the Markets in Financial Instruments Directive, known as MiFID, is a European Union law that provides harmonised regulation for investment services. Now a young Dutch company Degiro is taking advantage of the directive to offer retail investors the opportunity to trade shares at much lower commission costs than they have been used to.

According to Degiro, when an Irish investors buys or sells €10,000 worth of Kerry Group shares, the commission charged can range from €50 at Davy to €125 at Goodbody. Degiro will execute the same trade for €6. A trade in €5,000 of Google shares on NYSE costs €30 with Davy and €62.50 with Goodbody, but just 72 cents with Degiro.

Hammered

So the new platform is going to appeal to active investors who want to be able to make quick in and out trading decisions without being hammered by broker costs. Degiro enables share trades on most of the world’s major bourses and for more adventurous investors there are also facilities to trade in bonds, ETFs, futures and options.

The company was formed in 2008 when five guys from a Dutch broker broke away to set up a trading platform aimed at institution clients. One of the quintet was Gijs Nagel (pictured), 37, who explains: “When brokers started offering online services around 15 years ago, they were quite aggressive with pricing. Then the price stopped dropping as everybody was happy with what they were making. At the same time, exchange fees and the cost of lines to data centres has become much cheaper. So that’s when we thought, let’s do it.”

In Association with

In 2013, Degiro expanded its institutional offering to retail investors in Holland. The result is that small investors get to pay much the same commission as the big boys. Dutch stock traders piled in and Degiro now claims 30% of the share trading market in the Netherlands. Using MiFID, the platform has been rolled out across Europe, with Ireland the seventeenth company to get a localised website and the promise of local-based customer service.

Degiro claims that its fees are on average 90% lower than the commissions charged by established brokers. This is on the basis that the platform is execution-only, with no broker advice available. In fact investors don’t even get an email notification that their trade has been executed.

Nagel says that email notification is on the way shortly, and makes no apologies for Degiro being a work in progress. “We are looking at what clients want, and if enough clients want notifications then we build that. We have a mobile version of our trading platform for real time price on more than 1,000 of the biggest shares in Europe. But we try not to build the things that people don’t want.”

Degiro will be a boon for small investors who want to invest a couple of hundred euro. Because of the regulatory paperwork required in Ireland for client accounts, most stockbrokers aren’t interested in very small fry. Nagel insists that because of MiFID, the signing up process to Degiro is relatively simple.

Documentation

“We identify the client by the bank account that they transfer the money from, and that way we are complaint with the European rules, so people can open their account without sending any documentation to us. After you register, later on we may request a scan of identification documentation. In some countries this isn’t necessary and in other countries it is. It’s really about seeing how many questions we get about those things later on.”

Can Degiro be trusted with your cash? The company doesn’t disclose its financial performance, though Nagel says that client funds are held in a separate regulated entity that was built originally for Dutch fund managers. “There is zero risk of the company defaulting for any of its clients,” he claims. “When you withdraw money it goes from the money fund directly to your account. And there is also 100% liquidity in there, so there is no risk whatsoever.”