As part of my philosophy of keeping costs low, I’m a big believer in keeping trading commissions as low as possible. This is the reason for opening trading accounts with the lowest cost brokerages in Canada – Questrade and Interactive Brokers. These online stock brokers manage to can keep costs low as they operate in a virtual environment with very little brick and mortar overhead to worry about.
While surfing Canadian Money Forum the other day, I came across a thread mentioning Virtual Brokers (VB), the newest online stock brokerage in Canada. As I usually keep up with what’s available in the market, the new(ish) company piqued my interest. I was especially curious to see if they were competitive with other low cost stock brokers. From first impressions, it seems that this broker is geared towards traders. More details below:
Types of Accounts
Most Canadian online stock brokers offer all the standard accounts (except Interactive Brokers). While Virtual Brokers offers the standard, they also provide some extras. They offer: non-registered, TFSA, RRSP (and USD RRSP) along with an RESP.
It appears that they offer multiple trading platforms, from the free web based version to the more advanced trading software. The platforms include:
- Meridian (free) – their web based platform that is reported to be user friendly with direct to market access.
- AxisPro (free) – This is the same advanced trading platform that Scotia iTrade uses and is quite popular with traders.
- Iress and Belzberg – This platform is for qualified traders only, I can only assume that they are for high net worth clients.
I found their website to be a little confusing, but from what I understand, traders have a choice as to which commission structure they want. The two choices are:
- $6.49 per trade + ECN fee or
- $0.01/share (min $0.99 and max $9.99/trade) and no ECN fee.
The ECN fee is $0.04/share/trade if the trade removes liquidity (eg. market order) and can add up quickly. For option traders, add approximately $1.25 to the regular commission. Providing that $6.49/trade is for unlimited shares, this makes Virtual Brokers to be very competitive providing that the trade manages to avoid the ECN fee. I believe that other brokers that have the $9.99 trades for unlimited shares already include ECN fees (eg. iTrade, TD Waterhouse, RBC, BMO).
For small volume traders (<500 shares per trade), then $5 per ticket puts it in the same range as Questrade in terms of cost.
The “other fees” usually makes or breaks the broker. In this case, the low trading fees come at a cost. That is, real time quotes are not included in the account without paying a monthly fee which is similar to Interactive Brokers.
VB organizes their quotes into 3 packages which cost from $15/mo to $99/mo. Traders who can get by on level 1 quotes would survive with $15/mo which works out to be $180/yr. However, I didn’t read anywhere that a data package is ‘required’. So if you’re dead set on using Virtual Brokers, then you may be able to use their low cost platforms, but get your quotes from another brokerage account. One problem with this strategy however is for those looking to use the AxisPro trading platform which would be a drag without streaming quotes.
Here are some of the account administration fees:
- RRSP/TFSA: Free
- US RRSP/TFSA: $50 /yr
- RESP: $25 /yr
- EFT: Free
As I don’t have an account with Virtual Brokers, I can’t really comment on their platform, but I can compare their prices with other brokers. At first glance, it seems as though VB’s fees are very competitive for what they offer and is in direct competition with Questrade for the lowest cost RRSP/TFSA brokerage in Canada.
While VB looks tempting, their biggest downside is that they charge for real time quotes which adds up to at least $180 per year while most other brokerages have free quotes. I don’t think I’ll be switching my RRSP or TFSA from Questrade just yet.
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