Smarter 24

DeGiro

DEGIRO is a Dutch stock broker, relatively new on the European scene. It has been active for European investors since 2013. It boasts of providing retail clients with institutional level trading fees, having exclusively provided institutional services until 2013. The highly aggressive tariff structure makes DEGIRO one of the stock brokers more convenient to use for investing.

The combination of low rates and a user-friendly platform makes investing accessible to everyone.

Pros:

Extremely competitive fee structure.

A wide number of products and markets offered.

Mobile app is efficient and user-friendly.

High level of safety due to Dutch regulation.

Cons:

Web platform not suitable for advanced technical analysis.

Inability to connect API or external platforms (e.g. Multicharts or ProRealTime).

No in-depth education section.

2021 Ratings

4.8/5

4.8 out of 5

Trading fees and Costs

With regards to costs, DEGIRO uses:

  • variable fee structure for shares, bonds, ETFs / Investment funds. It means that the fees are calculated depending on the counter value you trade
  • fixed fee structure for options, futures, warrants. It means that you pay a fee for each contract you negotiate

These conditions apply regardless of the number of transactions made during the month/quarter: whether you execute 1 transaction per month or 1,000, you will always pay the same rates.

For this reason, DEGIRO is by far the most convenient for those small and/or passive investors interested in holding financial instruments for the long-term (buy and hold strategy).

A DEGIRO trading account can be considered an extension of your bank account, through which it is possible to have access to exchanges worldwide and to hold the purchased instruments in your portfolio. The opening, maintenance and closing of the account is completely free. The custody and deposit of securities is free as well.

There are no charges in the event of inactivity of your account. Another very advantageous aspect with DEGIRO concerns the extremely low financing costs when client makes use of Debit Money: it is in fact possible to use both intraday and overnight Debit Money with interest rate up to 1.25% on an annual basis.

In order to access to global stock exchanges there is a connectivity cost, called Degiro exchange connection fee. Each calendar year you will pay a maximum of 0.25% of your account value (maximum charge is € 2,50 per exchange) this cost is provided if you carry out an operation or if you maintain a position on an exchange other than the domestic one. For example, if you open an account with DEGIRO UK, you won’t pay any connectivity fee for London Stock Exchange; you will pay 0.25% of your account value (max. €2.50) for transactions or held positions on all other exchanges.

Real-time data are free on the domestic markets (except if you open account with DEGIRO UK, where you have to pay a monthly fee of £4.50 for real-time data on LSE), Euronext and CHI-X; all other price feeds are delayed by 15 minutes. Through the payment of a monthly fee it is possible to activate real time data for other markets (except NYSE, Canada, Australia, Hong Kong and Tokyo, where real-time data is not available).

For all transactions in a foreign currency, you can choose between two options:

  • Perform a manual conversion from the base currency of your account into nine other currencies (including USD, CHF, GBP, EUR). For the conversion you will pay € 10 + 0.02% of the converted amount. With DEGIRO in fact it is not possible to deposit dollars or any foreign currency directly into your account: you can only set up a Multicurrency account which allows you to convert your home currency into another currency.
  • Use the default setting (AutoFX) that executes foreign currency transactions by widening the spot rate spread by 0.1% both at the time of purchase and sale.

Trading platforms

DEGIRO offers two types of proprietary platforms: a web-based platform and an App for iOS / Android. In this review on DEGIRO, we tested both platforms that have very similar features and tools.

The web platform is accessible directly from the DEGIRO website via login with your credentials, while the App can be downloaded and installed on your smartphone and tablet.

It is not possible to connect APIs (although there is indeed an unofficial way to do it) nor to external software such as Multicharts and ProRealTime. 

As mentioned in the previous paragraph, not even a DEGIRO demo account is offered. Given the ease of use and the lack of advanced tools for both research and technical analysis, the DEGIRO platform is particularly suitable for novice investors or those seeking only an execution-only stock broker without additional accessory services.

If you want to increase the security of your account and limit the risk that any hacker can access to your account, you can enable Google’s two-step verification (two-factor authentication) within the login process, in addition to the insertion of username and password. We strongly recommend activating this security tool.

Safety

How are funds kept in DEGIRO?

Until the middle of 2020, DEGIRO was required by law to invest its clients’ liquidity in Money Market Funds (MMFs).

The MMFs were recognised funds with a duration of 60 days, 90% of which invested in triple-A government bonds, such as Germany, France and the Netherlands.

In the era of negative interest rates which we are currently experiencing, MMFs also have negative returns. For this reason, DEGIRO undertook to offer compensation for the negative returns generated by the first 2.500 euro of the cash balance of each DEGIRO account. Above this threshold, negative MMF returns were transferred to the clients.

DEGIRO has recently been acquired by the German bank Flatex. One of the main changes has been the way DEGIRO holds its clients’ funds.

Starting from July 2020, clients are assigned a personal cash account with a German IBAN. The sole purpose of this account is to be used to deposit and withdraw funds from the DEGIRO account (thus, it cannot be used to make bank transfers to third parties, for example). To fund a DEGIRO account, we will then have to make a transfer from the registered bank account to the German IBAN we have been assigned.

Clients’ liquidity is therefore no longer invested in FCMs but is held in Flatex Bank. In terms of security, thanks to this new approach, DEGIRO accounts are guaranteed by the German Deposit Guarantee Scheme, up to a maximum amount of € 100.000. Previously, DEGIRO trading accounts were protected by the Dutch Investor Protection Scheme, which compensated each client up to a maximum of € 20.000.

The use of Money Market Funds by DEGIRO, therefore, ceases to exist.

One thing that MMFs have in common with Flatex cash accounts is the current accrual of negative interest rates. For Flatex cash accounts, this negative return is around 0.50% per annum.

Also, in this case, DEGIRO undertakes to compensate the first € 2.500 kept on the cash balance of each client. Above this threshold, negative interest rates will be charged to the client.

For active users who have generated more than € 350 in commissions in 60 days, DEGIRO extends the compensation to the first € 100.000 held on the Flatex cash account.

In general, to avoid being charged such interests, it is sufficient to simply keep the liquidity in the counterpart bank account. Whenever we need liquidity on the DEGIRO account to execute transactions, we will have to deposit the funds by wire transfer.

When we then close the positions, we will have to be careful to transfer the excess liquidity to our bank account.

Thanks to this configuration described above, holding funds on the DEGIRO account is the same as depositing them in a real bank account, with all the resulting benefits in terms of security.