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Is it simpler to hold GICs in a brokerage account?
November 1, 2019
11:03 am
Londonguy
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Bill said
Update re selling GICs into secondary market: value of all GICs including accrued interest up to today approx. $543,500, 8 months remaining to maturity, best buy offer Investor's Edge could come up with was about $539,600. I'm assuming this would be typical for other brokers too. Owner would have to decide if that's worth it to them to get at their money.  

That's about 110 bps discount, but if someone absolutely wants their money ASAP, I agree that it beats being told they can't help you at all

November 1, 2019
11:30 am
AltaRed
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The secondary market for GICs is brutal but it is there if required.

November 1, 2019
11:34 am
Doug
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Thanks for the update, Bill, and Londonguy and AltaRed for the further comments. sf-cool

I hadn't realize there would still be some "negotiating" and market making in the GIC secondary market. I assumed they would just try and negotiate a willing buyer, but I guess that cost in basis points is to compensate the brokerage firm for making that market. 😉

Still, it's good to know it's there, if needed, and, at the end of the day, you're still getting all your money back—you're just agreeing to a haircut in your previously acknowledged return.

Cheers,
Doug

November 1, 2019
11:48 am
Bill
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The way they explained it to me, for example with regard to one of the GICs, was the offer is .9923 of the principal amount plus interest accrued to today. Whether the offer was from an interested buyer or from the brokerage itself for subsequent resale, I don't know.

November 1, 2019
7:53 pm
Norman1
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I don't think one will always get 99.23% of the principal (including compounded interest) plus accrued interest to date. It will depend on the rate on the GIC.

The buyer will look at what the GIC will pay for the remaining 8 months to maturity and price it like a bond.

If the GIC will pay 3% per annum for the remaining 8 months and current 8 month term deposits are 2%, then one could even get more than 100% of the principal!

However, if the GIC will only pay 3% for the remaining 8 months and one could now easily get 3.75% on an 8 month term deposit, then one would be lucky to get 99.23% selling the GIC early.

November 2, 2019
4:08 am
Bill
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Exactly, Norman1, it's essentially a bond, .9923 was just the market value of that GIC at that particular moment. And the brokerage's cut is buried within that price.

November 3, 2019
6:23 am
Bud
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Bit confusing why i havent bought on secondary market. I have sold during financial market distress and wasnt clipped too badly recall just lost most of the interest on a 1 or 2yr 7 or 8mths into

GIC King

November 3, 2019
1:33 pm
Briguy
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Norman1 said
I don't think one will always get 99.23% of the principal (including compounded interest) plus accrued interest to date. It will depend on the rate on the GIC.

The buyer will look at what the GIC will pay for the remaining 8 months to maturity and price it like a bond.

If the GIC will pay 3% per annum for the remaining 8 months and current 8 month term deposits are 2%, then one could even get more than 100% of the principal!

However, if the GIC will only pay 3% for the remaining 8 months and one could now easily get 3.75% on an 8 month term deposit, then one would be lucky to get 99.23% selling the GIC early.  

Is this secondary market for GIC's just through a brokerage? Or do FIs offer it too?

November 3, 2019
2:03 pm
Norman1
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Briguy said

Is this secondary market for GIC's just through a brokerage? Or do FIs offer it too?

It is not necessarily a secondary market. It may be just the broker calling around among his or her other clients to see if any of them would be interested in the pre-owned GIC.

It's not possible with the GIC's one buys from most financial institutions as the GIC's are not transferable. For example, EQ Bank GIC's are neither assignable nor transferable according to the GIC Agreement:

Assignment or Transfer

Your GIC may not be assigned and is not negotiable or transferable by you.

November 3, 2019
2:27 pm
Briguy
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Norman1 said

Briguy said

Is this secondary market for GIC's just through a brokerage? Or do FIs offer it too?

It is not necessarily a secondary market. It may be just the broker calling around among his or her other clients to see if any of them would be interested in the pre-owned GIC.

It's not possible with the GIC's one buys from most financial institutions as the GIC's are not transferable. For example, EQ Bank GIC's are neither assignable nor transferable according to the GIC Agreement:

Assignment or Transfer

Your GIC may not be assigned and is not negotiable or transferable by you.

  

Interesting, thanks for replying so quickly.

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