Connecticut-headquartered Interactive Brokers is asking its East European clients to migrate their accounts to the newly formed Hungarian subsidiary, Interactive Brokers Central Europe Zrt., (IBCE), Finance Magnates has learned.
The brokerage is sending emails to its clients across Eastern Europe seeking their approval on the migration of their accounts from the UK-regulated broker to Interactive Brokers (U.K.) Limited (IBUK) to the new Hungarian entity.
The multinational broker detailed that the move is forced by the upcoming expiry of the Brexit transition period.
“Your relationship with IBUK utilizes what is known as a financial services passport which allows the provision of services across Europe. IBUK’s passporting rights are expected to expire at the end of the year, and IBKR, therefore, plans to do business with you through a European entity as of 1 January 2021,” the email read.
As seen on a FAQs page maintained by the broker, it is willing to migrate clients from IBUK and European services by its US affiliate Interactive Brokers LLC (IBLLC) to the Hungarian entity.
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Though there is no set date for the proposed transfer, the broker earlier mentioned that the migration might take place in mid-December: a deadline that has already passed.
Retaining European Clients
The discount brokerage established the Hungarian entity and opened the Budapest office earlier this month, as Finance Magnates reported.
However, it is not clear if Interactive Brokers is sending such emails to all its clients in the European Union or only to the traders based in East Europe. It is to be noted that the brokerage has a physical presence in Luxembourg as well.
The broker is proposing its plan to transfer the client “account (including all positions, such as your cash, securities, and contracts) from IBUK to IBCE. Our intention is that once your account is transferred, all investments and services will be provided by IBCE (for convenience we will refer to this as the ‘Proposed Transfer’).”
If migrated, the clients’ accounts will lose the compensation scheme offered by the UK’s financial market regulator, but the accounts will come under the purview of the Central Bank of Hungary.