Notice: Although this Canadian online stock brokerage review/comparison is dated back to Dec 2006, the information below is updated regularly.
Are stock trading commissions eating away at your profits (or increasing your losses)? Ticked off at paying at least $29/trade at one of the big bank discount brokerages? Well there are some new players in town! They are MUCH cheaper and offer similar features. Who are we talking about? From my research, there are a number major (cheap) discount brokerages in Canada that are worth mentioning which include: E-Trade (now i-trade), Virtual Brokers, Qtrade, Interactive Brokers, and Questrade (voted #1 by Million Dollar Journey Readers).
As an update and side note, almost all discount brokerages are very competitive with low trading fees (under $10/trade). In addition to trading fees, keep an eye on annual maintenance fees if you are below the minimum balance, and especially foreign exchange fees. Most discount brokers will hide the fee in the exchanged amount.
Lets do a little table comparing all the features (last update January 4, 2015):
|Broker||RRSP / TFSA||Mutual Funds||USD RRSP||Commission||Comm Free ETFs||Fees||DRIP|
|Scotia i-Trade (formerly e-trade)||Yes/ Yes||Yes||No (offer reduced FX rates)||$24.99 or $9.99 /trade with $50k in assets or 30+ trades /quarter, $4.99/trade with 150+ trades /quarter||Yes (select group)||$25/ quarter for low activity. $0 if balance > $25k, $30/ quarter for US friendly RRSP.||Yes|
|IB||Yes/ Yes||No||Yes||Min $1 /USD trade. Max 0.5% of trade value ($0.005/ share)Min $1/CAD trade. Max 0.5% of trade value ($0.01 / share)||No||$10 USD/ mo (only if you don’t trade $10 worth of commissions/mo, waived if $100k USD balance), $50/year annual RRSP fee. Min $10k to open an account.||No|
|Questrade||Yes/ Yes||Yes||Yes||$4.95 for up to 495 shares ($9.95 max), $9.95 per mutual fund trade. ETFs are free to buy, reg commission to sell.||Yes (only when buying, selling is regular comm)||$0, but $19.95/ quarter if balance < $5k||Yes|
|BMO Investor Line||Yes/ Yes||Yes||Yes||$9.95/ trade no minimum balance||No||$100 / yr if less than $25k balance||Yes|
|RBC Direct Investing||Yes/ Yes||Yes||Yes||$9.95/ trade no minimum balance, $6.95/ trade if 150+ trades / quarter||No||$25 / quarter if less than $15k balance||Yes|
|CIBC Investors Edge||Yes/ Yes||Yes||No (offer FX at spot rate within RRSP and TFSA)||$6.95/ trade no minimum balance||No||$125 / yr if under $25k balance||Yes|
|Credential Direct||Yes/ Yes||Yes||No||$8.88 / trade||No||None||?|
|TD Direct Investing||Yes/ Yes||Yes||Yes||$9.99/ trade no minimum balance, $7/ trade if 150+ trades / quarter.||No||$100 / yr if under $25k balance||Yes|
|QTrade||Yes/ Yes||Yes||Yes||$8.75/ trade or $6.95/ trade if assets > $500k||Yes (select group)||$100/ yr admin fee if under $25k balance, $60/ yr for USD RRSP||Yes|
|Virtual Brokers||Yes/ Yes||Yes||Yes||Three options; 1) $0.01/share with cap of $9.99. 2) ETFs are free to buy, $0.01/share to sell min of $0.99/trade. 3) $6.49/ trade + ECN fees||Yes (only when buying, selling is regular comm)||$50/ yr if under $15k balance, $50/ yr for USD RRSP||Yes*|
Due to popular demand, below is the foreign exchange fee/spread charged by each of the brokerages to convert your CAD->foreign currency.
|Brokerage||Forex Fee/Spread (each way)|
|E-Trade||1.5% (not confirmed)|
|IB||0.01% + 2.50USD|
|CIBC||0.01% (approximately spot rate within RRSP/ TFSA)|
|Qtrade||1.75% for < $10k, 1.60% for > $10k but < $25k|
As you can see from the charts, there is no perfect brokerage that would suit everyone. However, there are some general guidelines:
- If you are looking for a USD RRSP, for larger accounts (>$50k), I like RBC Direct Investing for USD RRSPs. With a larger balance they offer relatively low trading commissions, no fees, and automatic journaling of shares (for the DLR/DLR.U trick) . For smaller accounts, Questrade offers the best product. With a small balance (greater than $5k), they offer no fees, ultra low commissions, commission free ETFs, and journaling of shares via online chat. Here is my Questrade Review that I’ve written.
- If you want to keep everything in CAD, CIBC Investors Edge now charges very close to spot rate when buying USD stocks (but maintained in CAD). This simply means that you don’t need to mess around with journaling etc to save money when converting CAD to USD.
- For long term index investors who use ETFs only, then Questrade likely offers the best overall product. No commission on buying ETFs, and a no fee USD RRSP for US based ETFs.
- If you are looking for an RRSP account to invest in mutual funds, then you have 3 options, big bank, E-Trade, or Questrade (additional fee applies).
- If you’re looking for an RRSP account (with little interest in mutual funds) that has no fees, low minimum deposit, low commissions and you trade less than 790 shares at a time and LESS THAN 50 trades/year, then Questrade is your best bet.
- If you’re looking for an RRSP account but with a larger balance and typically trade greater than 790 shares at a time and MORE THAN 50 trades/year, then CIBC Investors Edge is best.
- If you’re looking for a non-registered trading account with ridiculously low commissions and margin interest, then Interactive Brokers is a no brainer. There is a $10USD / month minimum fee with IB which means that if you spend less than $10USD in commissions in a month, they will charge the difference to your account. For example, if you spend $6 USD (6 USD trades) in commissions in a month, they will charge you an extra $4 USD. These monthly fees are tax deductible. IB also offers extremely cheap currency exchange. The biggest downside of IB is that you have to pay for your real time data. I use IB for my trading and my big bank brokerage for my real time quotes.
- There is one feature that I like a lot about big bank brokerages and that is FREE dividend re-investments (DRIP). For example, if you buy enough shares of CIBC to pay you $100 in dividends / quarter (enough for 1 share), you can set it up so that your brokerage will automatically purchase more shares of the same company with the dividend payout.
I personally use a big bank for my RRSP and Interactive brokers for my non-registered trading account. I’m sticking with my big bank for now because of the free DRIP. Update Jan 10/07: E-Trade AND Questrade now offer free DRIP!
There you have it! A simple review of some of the discount brokerage options out there. I believe that it’s only a matter of time before the big bank brokerages start reducing their fees. In the mean time, look at your personal situation and see if any of the companies listed in my review suit you. You can potentially save a substantial amount of money.
If you are interested in stock trading, here are some free online stock trading tools that I have used and recommend.
Update Nov 2013: Lately, I’ve been more focused on reducing my forex charges which can add up over time. This is especially the case when buying US stocks within a Canadian based RRSP. To save on these fees, I wrote an article rating the top discount brokers that offer USD RRSPs. For ETF index investors, a discount broker that offers commission free ETFs is a way to reduce trading fees when rebalancing and/or adding to the account. Here is a review of discount brokers that offer commission free ETFs.
Update Feb 15/07: As you can see, I’ve added CIBC to the chart. With their new commission structure, you get 50 trades for $395/year. This works out to be around $7.90/trade with no limit to the number of shares you can buy. After the 50 trades are up, it gets even cheaper, $6.95/trade. What I REALLY like about this structure is that you can purchase the same stock as MANY times as you like during the day, and you’ll only be charged for 1 trade. The same applies for selling, you can sell the same stock as many times as you want during the day and be charged for only 1 trade. This still may not be the lowest cost solution for the small time investor, but once you start making bigger trades, CIBC has the lowest trading fee of all brokerages in Canada.. I commend CIBC for taking the initiative that the other big banks have not taken, that is to reduce trading fees for Canadians.
Update Feb 23, 2007: I have opened a new RRSP account with Questrade.
Update June 25, 2007: Here is a detailed Interactive Brokers Review.
Update July 10, 2007: Here is a CIBC Investors Edge Review.
Update July 17, 2007: Canadian Capitalist has written a review of RBC Direct Investing.
Update July 19, 2007: Here is a detailed E*Trade Canada Review (now i-trade).
Update July 23, 2007: Canadian Capitalist has written a review of TD Waterhouse.
Update Aug 7, 2007: Canadian Capitalist has written a review of BMO Investorline.
Update: Jan 2, 2007: IB now requires a minimum initial deposit of $10,000USD to open an account.
Update: April 8, 2008: We’ve written a review of TradeFreedom discount brokerage.