With Bitpanda, you invest in stocks and ETFs via a derivative contract. However, this means that you do not have direct ownership rights of your shares and ETFs. This creates a specific risk in the event that Bitpanda becomes insolvent. In order to mitigate this, we implemented a “pledge agreement” (Pfandrecht), a type of security measure triggered by a potential insolvency of Bitpanda.
It works as follows: Every time you buy derivatives, you enter into a pledge agreement. In the event that Bitpanda becomes insolvent, you enjoy preferential treatment compared to other creditors. Instead of only receiving an insolvency quota, you will receive the equivalent value of your derivatives.
Please keep in mind that even though we are fully committed to protecting your investments with the "pledge agreement", certain insolvency proceedings, e.g. an invalidation of the pledge agreement, could lead to a decrease in users’ collateral. A more detailed description and potential risks can be found in the prospectus.
Keep in mind
Bitpanda Stocks enables you to make fractional investments. To allow for this, Bitpanda issues a derivative contract which is backed by the underlying stock or ETF. You can read more about this here.