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National Bank slashes online trading commissions to 'Zero'! :-)
August 23, 2021
8:18 am
Dean
Valhalla Mountains, British Columbia
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.
This just in from The Globe And Mail :

Any bets on which of the Canadian banks will be next ❓

I'm guessing TD ... time will tell.

    Dean

sf-cool " Live Long And Prosper " sf-cool

August 23, 2021
10:39 am
Bill
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I wish the article had at least addressed why a profit-seeking business thinks it's a good idea to expand business by charging zero. On the surface it makes no sense, how does this increase profits?, writer ignored obvious question even a child would wonder about.

August 23, 2021
11:05 am
Dean
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Bill said

I wish the article had at least addressed why a profit-seeking business thinks it's a good idea to expand business by charging zero. On the surface it makes no sense, how does this increase profits?, writer ignored obvious question even a child would wonder about.  

It's not really an obvious question anymore, because it's been asked and answered many times before ... ever since Zero commissions were first introduced in the States, by the brokerage firm Robinhood back in 2014.

Here's a recent explanation to your question, and some pros & cons to Zero commissions

Hope that helps.

    Dean

sf-cool " Live Long And Prosper " sf-cool

August 23, 2021
11:27 am
Norman1
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If the other bank brokerages didn't follow National Bank's previous cut to $6.95, why would they follow National Bank's recent cut to zero?

The bank brokerages will do nothing if it turns out only a small number of accounts is lost. Just like their bank owners ignore EQ Bank's 1¼% savings account.

August 23, 2021
11:33 am
Bill
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I guess I was among the few that didn't know that - thanks for the info, Dean.

I agree, Norman1, the big banks cater to the middle of the curve, not the extremities. It's why they're the big ones. Though personally whether a trade costs zero or $10 is irrelevant to me, only if it significantly erodes their business, i.e. I'm an anomally, will the bigs react.

August 23, 2021
2:59 pm
Dean
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Norman1 said

If the other bank brokerages didn't follow National Bank's previous cut to $6.95, why would they follow National Bank's recent cut to zero?

The bank brokerages will do nothing if it turns out only a small number of accounts is lost. Just like their bank owners ignore EQ Bank's 1¼% savings account.  

For online trades, my Crystal Ball tells me the Canadian banks will eventually follow what most of the American banks have done in recent years.

One of many examples ➡ https://newsroom.bankofamerica.com/press-releases/consumer-banking/bank-america-expands-unlimited-zero-dollar-trades-all-merrill-edge

Time will tell sf-wink

    Dean

sf-cool " Live Long And Prosper " sf-cool

August 23, 2021
6:02 pm
COIN
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HSBC tried that in the past year or so but you had to do xxx number of trades per quarter before you get the freebies.

August 24, 2021
4:22 pm
Dean
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COIN said

HSBC tried that in the past year or so but you had to do xxx number of trades per quarter before you get the freebies.  

With National Bank's NBDB and Power Corporation's Wealthsimple there are no such requirements. For self-directed online trading, you are charged 'Zero' commissions from the get-go.

As what happened in the States over the last few years, more are bound to follow suit here in Canada.

    Dean

sf-cool " Live Long And Prosper " sf-cool

August 24, 2021
4:37 pm
mordko
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COIN said
HSBC tried that in the past year or so but you had to do xxx number of trades per quarter before you get the freebies.  

Are you sure? Investdirect has active trader pricing but there are charges.

August 24, 2021
5:27 pm
COIN
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mordko said

Are you sure? Investdirect has active trader pricing but there are charges.  

From memory which is far from perfect, I think HSBC was a promotion and not a permanent feature. Looks like the promo is over.

August 25, 2021
10:17 am
savemoresaveoften
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Norman1 said
If the other bank brokerages didn't follow National Bank's previous cut to $6.95, why would they follow National Bank's recent cut to zero?

The bank brokerages will do nothing if it turns out only a small number of accounts is lost. Just like their bank owners ignore EQ Bank's 1¼% savings account.  

Agree. A platform's ease of use and features offered will keep/win business. It is way more important than worrying about $7-$10 commission per trade. Unless one is trading tiny amounts all the time, and if that is the case, should not even be trading...

I guess National Bank is looking to mimic Robinhood or other US zero comm broker and cater to the frequent small trades clients.

Keep in mind, brokerage firms will earn rebate fee from the exchange for certain type of trades and volume esp in US stock trades. Not sure how CDN exchanges work.

August 25, 2021
11:21 am
mordko
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savemoresaveoften said

Agree. A platform's ease of use and features offered will keep/win business. It is way more important than worrying about $7-$10 commission per trade. Unless one is trading tiny amounts all the time, and if that is the case, should not even be trading...

  

A family of 2 can easily have 10 accounts between them. Dividends drip in. Some monthly, some quarterly. New money needs investing. Some require converting. Norbert’s Gambit requires 2 trades each time. You can, of course, delay your investments to minimize trading costs. But that in itself is a cost of lost opportunity.

I am not saying trading commissions costs are large but its more than the actual commission. Creates psychological barriers and additional losses vs a truly passive approach. So, free trading is attractive to me.

August 26, 2021
7:34 am
savemoresaveoften
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mordko said

A family of 2 can easily have 10 accounts between them. Dividends drip in. Some monthly, some quarterly. New money needs investing. Some require converting. Norbert’s Gambit requires 2 trades each time. You can, of course, delay your investments to minimize trading costs. But that in itself is a cost of lost opportunity.

I am not saying trading commissions costs are large but its more than the actual commission. Creates psychological barriers and additional losses vs a truly passive approach. So, free trading is attractive to me.  

If someone doing in-and-out trades regularly, then yes trading commission will impact. However I can argue $0 commission may just end up having an adverse impact, as in trading for just the sake of trading, similar to buying cuz its on sale...
On the other hand, for investing purpose, trading commission should be not part of the equation. Its the quality of the asset, the entry price that drives 100% of the decision.
For me, $0 commission is nice but definitely not the deciding factor.

August 26, 2021
8:10 am
mordko
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savemoresaveoften said

If someone doing in-and-out trades regularly, then yes trading commission will impact. However I can argue $0 commission may just end up having an adverse impact,   

It could but in my case, I made 50 trades last year and it had nothing to do with “in-and-out” trades. Purely dripping dividends and new funds, Gambit trades, passive investing. Proliferation of accounts isn’t my fault: 2 people with TFSAs, RRSPs, joint and individual margin accounts, LIRAs… If I had to pay commission, I would have waited until each trade was $5k or so. Add up cash in all the accounts and over a number of years that would have translated to a noticeable drag.

August 26, 2021
12:28 pm
geotabs
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I remember reading a few years ago that Ameritrade made over $800 million in paid orders routed to certain market makers or firms and I would assume the same for all the free or otherwise brokers!
They will also make money from currency conversion, I just moved my RRSP to them and the Norbert Gambit takes 3 days to clear and if you want to convert right away then depending on how much you convert it's anywhere from 2 - 2.6% compared to TD that was 1 - 1.75% and they also washed the norbert trade same day!
I'm also curious if they would make money on the bid ask spread on some of the higher priced stocks?
I'm also with IB and a lot of times I would get filled between the bid ask with TD or NBDB I don't.

August 27, 2021
11:13 am
Dean
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.
Here's a good run-down on how the brokerages Still make Lots of money, even with 'Zero' commissions . . .

And Yes, I'm convinced that 'Zero' commissions will eventually become the norm here in Canada too ... it's just a matter of time. Down in the States it took ~ 7 years. Here in Canada, it may take a bit less time, because of what has already happened in the States.

One of the driving forces will be the 'New Money' coming into the markets (Millennials, etc.), who will open their first investment accounts with the 'Zero' commission brokerages, instead of the others.

    Dean

sf-cool " Live Long And Prosper " sf-cool

August 27, 2021
1:03 pm
savemoresaveoften
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geotabs said
I remember reading a few years ago that Ameritrade made over $800 million in paid orders routed to certain market makers or firms and I would assume the same for all the free or otherwise brokers!
They will also make money from currency conversion, I just moved my RRSP to them and the Norbert Gambit takes 3 days to clear and if you want to convert right away then depending on how much you convert it's anywhere from 2 - 2.6% compared to TD that was 1 - 1.75% and they also washed the norbert trade same day!
I'm also curious if they would make money on the bid ask spread on some of the higher priced stocks?
I'm also with IB and a lot of times I would get filled between the bid ask with TD or NBDB I don't.  

Correct, they get rebate with exchanges, and the rebate can be generous depending on the nature of the trade.

Also like you said, pretty much all "professional style" trades are filled btw bid and ask. This is indirectly related to the rebate you mentoned as well. With discount brokerage owned by Cad banks, zero luck they will share that fortune with you. With IB, you can also participate in sec lending which is not avail at the cad owned brokerages.

Having said that, free is still good for the majority of accounts out there, which are not professional and may not even understand all the rebates and fill-at-mid that are going on out there.

August 27, 2021
7:08 pm
COIN
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"With IB, you can also participate in sec lending which is not avail at the cad owned brokerages."

Please clarify. Are Canadian owned brokerages not permitted to lend securities?

August 28, 2021
5:37 am
savemoresaveoften
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COIN said
"With IB, you can also participate in sec lending which is not avail at the cad owned brokerages."

Please clarify. Are Canadian owned brokerages not permitted to lend securities?  

For Cad owned brokerage, your holdings are in segregated acct, so the brokerage are not permitted to use it in their sec lending business.
Cad brokerage do have sec lending, but can only access the shares that are not in the segregated acts.

For IB, one can sign up and have their account holdings participated in sec lending. IB will thus utilize the shares u own in sec lending, and share the interest recd with you. For example if you own some of the meme stocks or even Blackberry which has a very high borrow cost, the interest can be very hefty and juicy for someone who is long the stock and can ‘lend’ it out to the short seller.

It’s a complicated process as IB needs to deposit cash equivalent in your acct daily to mitigate the risk, and need to have the infrastructure in place to handle all that. None of the cad brokerage has that capability is my understanding right now.

August 31, 2021
2:44 am
RetirEd
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I can't figure out what the "IB" referred to in this thread means...
RetirEd

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