DeGiro’s response to the previous post on matching client flow to their own hedgefund was a 3 page long pdf. While ignoring the big elephant in the room, they had some valid points too. And some nonsense.
Valid points first. When your broker collapses, your position in derivatives isn’t secured nor guaranteed. Whether the transactions are executed on exchange or matched inhouse, this doesn’t really matter. When your broker goes down, you’re screwed with derivative positions. This applies to any broker, not only DeGiro.
The Central Counter Party (CCP) is safeguarding firms higher in the hierarchy, such as ABN Amro Clearing. Therefore the CCP protects you against “risk through the chain” impacting your broker. So, DeGiro is just as safe as any other broker? Not so fast. DeGiro is closely tied to their hedge fund. If the hedge fund collapses with a bang, so will DeGiro.
The elephant in the room
The main point remains client orders are sent to DeGiro’s hedge fund. DeGiro argues hedge fund HiQ is just a regular client. And clients match with clients – so retail customers match with HiQ. Anyone believing HiQ is a regular client just like any other, is believing in fairy tales (and/or working for the AFM).