Global broker IBKR plans DIFC office to expand Middle East presence

Nasdaq-listed electronic broker and trading platform Interactive Brokers (IBKR) is looking to expand its Middle East client base with a new office in the UAE, as regional investors look to diversify their portfolios.

The office, which will be located in the Dubai International Financial Centre, is awaiting final regulatory approval.

The electronic brokerage firm is among the world's largest, with 2,412,000 daily trades on average, according to IBKR's website. The Greenwich, Connecticut-headquartered company has more than 2.75 million registered client accounts, as per its latest available performance metrics for March, and serves clients that include individual investors, hedge funds, proprietary trading groups, and financial advisers, among others.

“It is our intention to establish a branch in the DIFC subject to approval from the relevant authority,” Katherine Ewert, director of public relations at Interactive Brokers, told The National.

A post by a member of the SimplyFI's Facebook group, a private community of personal finance and investing enthusiasts, also confirmed the news.

The post claimed the brokerage firm is “close to opening a regulated office in Dubai in the middle of this summer”.

IBKR is “actively working on a number of projects, which included opening a local bank account for Dirham-denominated cash transfers; launching a local phone number with support in Arabic, access to GCC exchanges, and launching Sharia-compliant products”, the Facebook post said, citing an email by IBKR’s head of development.

Through the company’s single integrated platform, users can buy and sell securities, commodities, and foreign exchange round the clock on more than 150 markets in 27 currencies, as per information on its website.

The online trading platform is regulated by the Securities and Exchange Commission and the Financial Industry Regulatory Authority in the US, and other regulatory bodies around the world.

Growing interest

Retail investors are increasingly seeking access to markets with the help of technology, leading to a surge in popularity for digital trading platforms.

Demand for trading platforms soared during the Covid-19 pandemic as monetary easing by the US Federal Reserve and other central banks around the world gave novice day traders more money to invest in stocks and other assets during lockdowns, according to a report by Finra Investor Education Foundation and the National Opinion Research Centre at the University of Chicago.

Online trading in the Middle East, and the UAE particularly, is growing at spectacular rates, bolstered by wide internet penetration, high smartphone adoption, robust regulatory frameworks and rising trading awareness among retail investors, with commonly traded assets include stocks, commodities, currencies, and cryptocurrencies.

A number of digital broking and trading firms are operating in the UAE, providing investors access to a wide range of trading opportunities across different assets and markets, boosted by a favourable regulatory structure.

Among the prominent ones include, but are not limited to, ADSS, Etoro, XTB, IG, Sarwa, Forex.com, Oanda, Saxo bank, among others.

These and other players provide host of benefits to investors, such as a broad product portfolio, low trading fees, fast deposit, withdrawal and account opening, high interest on cash balances, backed by technical research tools and customer support in both English and Arabic.

Of these, the offering of interest payments on cash balances has been one of the key features that’s driving the growing popularity of broking and trading platforms, as banks in the UAE continue to offer customers low savings yields despite high interest rates globally.

UAE platforms

Last year, the UAE-based low-cost trading and robo-advisory platform Sarwa, unveiled a cash account with a 3 per cent annual interest rate. Sarwa Save came with a zero-transfer cost for local dirham accounts, requires no minimum balance and has no management fees, Sarwa said at the time.

Similarly, UAE-based digital wealth manager StashAway raised the rate of return on its cash management portfolio to 4 per cent in February last year.

Most central banks in the GCC follow the US Fed's policy rate moves due to their currencies being pegged to the US dollar. Kuwait is an exception in the six-member economic bloc as its dinar is linked to a basket of currencies.

While the cost of borrowing has risen in line with the rate increases, banks have been slower to pass on the benefits to savers.

Most local banks in the UAE have minimum salary and minimum balance requirements for their savings accounts.

But leaving idle cash in a bank's savings account means that it is losing value every day because inflation is expected to stay high. In an unpredictable economic climate, cash management programmes or high-interest savings accounts present an alluring alternative for investors to increase their returns on investments.

The DIFC has grown at a robust pace over the past several years. Last year, it attracted a record number of companies, leading to a 45 per cent annual jump in its net profit for the year.

DIFC expects to continue to attract companies this year despite concerns about the slowdown of the global economy and geopolitical tensions.