Trading US ETFs when you using an EU broker
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April 2024 · 5 min read

My European broker can't trade US-ETFs


European and United Kingdom-based retail investors can only invest in ETFs that conform to specific EU UCITS regulations. This means that US-domiciled ETFs are not available for EU and UK investors to trade via European brokers, as they do not meet the regulatory requirements. To address the difference in regulatory environments, many ETF providers offer EU-domiciled versions of their US-based ETFs.

Why is this?

The EU passed specific MiFiD II regulations in 2014 in order to raise standards and increase transparency in the financial markets. Some of the requirements of this bill, to protect retail investors, ensure that all ETFs much have the following documentation:

  • Frequent reporting for additional transparency
  • The Key Investor Information Document (KIID) for better disclosure, and to allow investors to more easily compare products.
  • Prospectus for disclosure of risks.

These came into strict force from 2018 onwards in various forms. Since many US-ETFs cannot fulfil these requirements, US ETFs are not eligible for EU+UK investors to trade through European brokers. The additional regulatory overhead means that some of the providers of the EU-based versions of the US ETFs generally have higher fees than their US equivalent.

What does this mean for STRATxAI users?

You can fully Xplore ETFs using the tool, and if you are on the Xplorer plan you can link your saved ETF strategy to a 1-click Paper or Manual portfolio.

However if you are an Xplorer plan holder with Connect augmentation who is domiciled in the EU or UK you will not be able to link a live portfolio and automated the trading of US-ETFs through your broker. Please note that this is EU law and your broker is obligated to prevent these trades.

It is possible to source equivalent EU-ETFs which have been created with the purpose of copying the US-ETF to get around this issue. In this scenario an STRATxAI user can use the manual portfolio manager for guided trading, replacing the US ETFs in your strategy with the EU ETFs equivalent in your broker.

If you do this bear in mind the following:

  1. The backtests and analysis will be based on the US-ETFs and results may differ with EU equivalents.
  2. Your STRATxAI portfolio manager will always retain the US-ETFs, but you can keep track of the buys and sells you have executed in order to benefit from rebalancing advice.

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