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Discount Brokerage Weekly Roundup – Sept. 28/12

Discount Brokerage Weekly roundup:

This week, we learned of a couple of major developments in the Canadian discount brokerage marketplace that  are likely to reshape the competitive landscape.  First, the major news that optionsXpress Canada is putting a hold on opening new Canadian accounts.  We found out from optionsXpress that out that for now this is a temporary measure while Schwab, the parent company of optionsXpress Canada, evaluates its overall business units.  While one discount brokerage was pausing, another one was readying to launch a long awaited product  back into the marketplace.  TD Waterhouse discount brokerage is readying itself for the relaunch of thinkorswim Canada. The ultrapopular stock and options trading platform has been on hold for some time now, but according to thinkorswim Canada reps, they will potentially be accepting new clients again starting in October 2012.

Canadian Discount Brokerage Tweet of the week:

This week saw a lot of great tweets put forward by several discount brokerages.  The winner this week (by a slim margin) goes to @questrade for the article on investing in ETFs [Do you trade mutual funds or ETFs? Give this a read: …]

Honorable mention goes to @jitneytrade for finding a  great article on the evolving capacity of global exchanges (

Event Horizon:

Options Education Day is taking place in Toronto this Saturday (event details can be found here).  If the food there was as good as it was at the Vancouver session, the Toronto folks will be well rewarded for going to school on a Saturday.

The people have spoken:

The recent launch and migration of Questrade clients over to the IQ platform has been met with mixed reviews.  Change isn’t always an easy thing for clients to navigate – and this thread in the Red Flag Deals personal finance forum shows the “support” and “resistance” to the switchover.


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thinkorswim Canada almost ready to accept new clients

One of the best rated stock and options trading platforms, thinkorswim, looks like it will be opening its doors again for Canadian investors.  From various conversations with TD Waterhouse discount brokerage representatives, traders and investors alike,  regaining access to the thinkorswim platform for Canadian discount brokerage clients has been widely anticipated.  Finally, it seems that there is a definitive timeframe that has been provided for a roll out to new clients.

It appears that thinkorswim is in the midst of a technical upgrade but sometime in October they should be back to accepting Canadian clients.  Since thinkorswim Canada is owned by TD Waterhouse discount brokerage, you’ll have to be a client of TD Waterhouse to gain access to the thinkorswim platform.  Specifically, only US dollar personal margin account or corporate accounts will be able to use thinkorswim and trading will be limited to US stocks and options.

Additional conditions include a minimum account opening amount of $10,000 and minimum trading activity of 30 trades per quarter.  Trade commissions will be charged at $9.99 flat fee for stock trades and $9.99 +$1.25/contract for options trading.  Option assignments will cost $15 flat. Interestingly, there are currently no platform fees for thinkorswim.

To find out more information on the platform or to download a free trial of their software (a great ‘try before you buy’ feature) you can visit the thinkorswim Canada page here.

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Taking a time out – optionsXpress Canada holding off on new Canadian accounts

As an update to our earlier story regarding optionsXpress Canada and their suspension on accepting new Canadian discount brokerage accounts, we received the following official statement from Schwab, the owner of optionsXpress Canada:

“We are in the process of evaluating each business for strategic fit as part of the ongoing integration of Schwab and optionsXpress. To facilitate this process, we have placed new account openings in Canada on hold until our evaluation is completed, however, existing accounts will remain open during this review.”

When asked how long this review might take, no specifics were provided, however we were told that the review would be taking place “as efficiently and expediently as possible.”

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Pit Trading – A “handy” how-to infographic

Even though trading floors and exchanges have largely been replaced by server rooms filled with boxes of computer parts, there are still some places in the world where the movement of money or commodities is governed by people who can yell the loudest.  Welcome to the world of outcry pit trading, a place that redefines “hand to hand” combat. While few in number, some of the exchanges, such as the Chicago Mercantile Exchange (CME) are among the world’s most influential centers of trading.  We found this fun infographic explaining the incredible sign language used by pit traders (a style of trader communication mentioned by AJ Monte at the Scotia iTrade Education Summit) to move around billions of dollars worth of stuff. Also, if you’re interested in learning more about this type of trading, check out a neat blog dedicated to hand signals and pit trading.

open outcry trading hand signals
Click to see the full size image


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Event Review – Scotia iTrade Educational Summit – Vancouver 2012

As part of its cross country tour, the Scotia iTrade Educational Summit stopped in Vancouver and we had a chance to check out what it was all about.  This evening session featured presentations on how to go about investing in markets using technical analysis and risk management (provided by AJ Monte of The Market Guys), as well as a presentation and product tour of the FlightDesk™ and mobile trading app provided by senior manager for product strategy for Scotia iTrade, Kevin Dunseath.

The first segment with AJ Monte, Searching for Opportunities in Volatile Markets While Managing Risk, kicked off with a fun little exercise of simulating an open outcry style market pit.  Nothing gets a room going like 200 investors being able to yell “buy Apple” pit-trader style.  During the segment, AJ went through the basics of technical trading, the importance of volume and price action, and how to manage risk by controlling position sizes and using stop-losses.  While the session provided a brief overview of candlesticks and charting, the key takeaways are that buy-and-hold as a strategy may need to give way to buy-and-protect, and that managing risk effectively will ensure your odds of surviving and succeeding will improve.

Scotia iTrade also provided attendees with a chance to tour their new FlightDesk™ platform and their mobile trading app.  While we didn’t get to see the mobile app in action, we did get a chance to walk through some of the key features.  One of the interesting new features coming out in the next release of the mobile platform is the ability to receive ‘unauthenticated’ quotes and watchlist updates meaning that you won’t have to log in every time you want to receive a quote or view your watch list.  Also coming up in the next update of the mobile app is the improved ability to transfer between brokerage account and a bank account.

The FlightDesk™ platform has quite a number of tools that cater to both active as well as non-active investors.  The interface itself looks very slick; however with any piece of software, functionality will determine its worth.  Some interesting features of the platform include the ability to create heat maps (even with Canadian stocks), and the ability to chart options prices.  Some drawbacks, such as the inability to float windows (i.e. place FlightDesk™ windows anywhere on your desktop) mean that there is still some room for improvement, especially for active traders’ needs.  One popular feature on the release horizon is an upgrade to the order types that can be handled (such as bracket & contingent orders) as the current set of order types FlightDesk™ can handle is fairly standard.

Overall, the event was a good opportunity for do-it-yourself investors to connect with their discount brokerage and to get a basic introduction to some educational concepts and tools that can be useful when investing on your own. This type of event also provides the chance to ask and find out about specific features of interest from the iTrade representatives directly.

From an educational perspective, this event did provide a few basics, but is certainly something that individuals would want to build upon. Fortunately, Scotia iTrade offers a number of free webinars and seminars (here’s the link to the Scotia iTrade investor education calendar), many in partnership with AJ Monte, that cover educational topics of interest for the do it yourself investor.  To find out about more investor education events being offered in Canada and online, you can check out our calendar here.

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OptionsXpress Canada Suspends Accepting New Canadian Clients

Conditions in the discount brokerage space seem to have taken their toll on OptionsXpress Canada. has learned that, as of mid September 2012, OptionsXpress Canada has suspended accepting new accounts from Canadians and has no plans to continue accepting new accounts from Canadians in the near future. We will continue to monitor this as more details become available.


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How to Choose an Online Discount Broker

With over 15 discount brokerages in Canada to choose from, picking the best online discount broker can seem like a daunting task.  We’ve tried to make that task a lot simpler by putting together a comprehensive comparison and review section on the Canadian discount brokerages.

One of the most important factors in choosing a discount brokerage firm is definitely the cost. Whether you are an advanced day trader or a beginning investor, cost always matters.  What we at Sparx Trading understand, however, is that for those who are starting out, understanding what questions to ask and, more importantly, how to understand the answers is key to making an informed choice.

More than anything, knowing what your needs are before you go shopping around will make for a far less time-consuming experience.  In the links listed below, we’ve tried to break down the process of choosing an online discount brokerage into ‘bite-sized’ pieces so that you can get the relevant information without getting overwhelmed.  We hope you find this useful and please let us know your feedback by sending us a note.


Part 1:  Introduction

Part 2:  What is an Online Discount Brokerage?

Part 3:  Account Types

Part 4:  Commission Pricing I

Part 5:  Commission Pricing II

Part 6:  Beyond Commission Pricing


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The Mighty TFSA

Tax Free Savings Accounts (TFSA)

Many of you are probably familiar with the saying: “the only sure things in life are death and taxes.” Well, as of January 2009 there’s been a little ray of hope as far as those taxes are concerned.   In February of 2008 the Canadian Minister of Finance (Jim Flaherty) announced a new program would start in 2009 that would forever change how Canadians can choose to save their hard-earned money.

Before the TFSA was introduced, if you saved or invested your money(the money you would have already been taxed on) you would then go on to be charged more taxes if those savings or investments made money. Many Canadians felt that they were being punished despite trying to do the right thing by saving or investing. While many of those same rules are still in place, the reason a TFSA is so innovative is because it gives Canadians an option to save and grow their money without having to pay any taxes on it. Sounds like a great option to us.

What is a TFSA exactly?

A TFSA is a special type of account that enables Canadians to grow the money in the account tax-free.   Whether the money is in cash or is invested in allowable products (such as stocks or GIC’s) any money made within a TFSA account will not be taxed.  For example, when most people saved money in a bank they generally put the money is a savings account.  Aside from keeping the money safe, there was the added bonus of gaining some interest for parking your money there.  The consequence of earning some interest is that it can be taxed as income by the government.  In a TFSA, however, any money earned in the TFSA is not taxable by the Canadian government – ever.

How it works?

Most large Canadian banks as well discount brokerage firms offer a TFSA.  Opening a TFSA is generally as simple as opening any other account at these institutions.  In order to qualify for getting a TFSA however you have to meet the following criteria:

  1. You have to be a Canadian resident
  2. You have to have a Social Insurance Number
  3. You have to be 18 years of age or older

The government has set a limit on the amount of money you are able to contribute into your TFSA in any one year. In the first year of the program (2009) the amount was set at $5000 and every subsequent year this amount increases according to the inflation rate. As of 2013, the limit will now be $5500.

The good news is that you are able to carry forward any unused contribution room to future years so even though you might not have opened a TFSA in 2009, you have accrued the contribution room since that time.  The CRA will provide the contribution room figure on your income tax statement (called the Notice of Assessment).

To help understand better how a TFSA works, let’s walk through an example. Suppose you had $1000 to save in the first year (2009) and you decided to put that $1000 into a TFSA. Your contribution limit for the year was $5000 but since you only used up $1000, you’re left with $4000 of extra room for that year. As of January 1st the following year your contribution room would increase by $5000 plus any unused contribution room from the prior years ($4000) bringing your grand total of contribution room to $9000.  The exact amount of contribution actually is slightly more than $5000 each year because of inflation. Your personal amount can be found on your tax return or via Canada Revenue Agency’s  “my Account” website [] .

Some Limitations…

There are, however, some important limitations to how you can access the account that you should be aware of.  Probably the one that causes the most trouble for people is in understanding how money can be put back into a TFSA after it has been withdrawn.  Even though you can withdraw money from a TFSA without any tax penalties, you have to keep track of how much you removed and how much contribution room you have left for the year because the CRA will penalize you if you over-contribute (i.e. put more money in your TFSA than you are allowed to).

Let’s use an example to clarify.  Suppose you have $5000 of contribution room in 2010 and you decide that in January you want to put $4000 into your TFSA. Since you have $5000 of contribution room then depositing $4000 will not exceed your contribution limit and therefore not result in any penalty and it leaves you with $1000 of contribution room for the rest of the year. Now let’s suppose that in June you need to make some repairs to your home so you remove the $4000 from your TFSA.

Here’s where it gets a bit tricky – because you have already made a “contribution” of $4000 you only have $1000 of “contribution” room left for the calendar year of 2011.  If you decide to put money back into the TFSA, that would count as a “contribution” and so you would only be allowed to “contribute” $1000 more for that year.  If you tried to deposit $4000 you would actually go over your contribution limit by $3000 ($1000 remaining contribution room – $4000 deposit) at which point CRA would penalize you for every month you have that excessive amount ($3000).  To quote the CRA website:

You cannot contribute more than your TFSA contribution room in a given year, even if you make withdrawals from the account during the year. Withdrawals from the account in the year will be added to your contribution room in the following year. If you over-contribute in the year, you will be subject to a tax equal to 1% of the highest excess TFSA amount in the month, for each month you are in an excess contribution position ( )

Although it sounds a bit complicated, just remember that your total deposits for the year cannot be more than your contribution limit each year, regardless of how much you remove.  The good news is that you “get back” the contribution room at the start of the following year. So in our example above if the contribution room as of January 1st  2011 is set to  $5000, that would mean that you could deposit up to $5000 + $4000(the amount you removed from the past year) = $9000.

Why get one?

Earning money is hard enough for most people, so when we see those deductions from our paycheques we know that what we earn isn’t necessarily all we take home.  While it’s not a knock against taxes, from the point of view of the individual, to get ahead you and your money have to factor in taxes.  Having the opportunity to put your money to work and then be able to have it grow means that it is working more efficiently. Remember that the harder your money works, the harder you don’t have to.

While traditional savings strategies are safe, they typically do not earn much of a return.  On the other hand, because you are able to buy other investment products through your TFSA (such as stocks) you are able to take advantage of more strategies (such as dividend paying strategies or capital gains strategies) without incurring extra tax consequences. Another important catch however is if you decide to invest the money in your TFSA in a stock and you suffer a loss on the stock, you can’t claim the capital loss against any capital gains.

There are many reasons people open up and keep a TFSA – they may be saving for a rainy day or just saving for a special vacation or specific purchase. Others use their TFSA to get the most out of their investments. For those who like to trade stocks and are good at it (big catch there!) a TFSA is an amazing opportunity to lock in tax free gains.  While TFSAs are a lot like other normal bank accounts, there are some things you’ll want to be aware of if you have one or are looking around for one.

What you need to ask when shopping around

One of the first things you’ll want to know about is if there are any fees associated with opening or holding a TFSA with a financial institution. Not many institutions charge them, but a few do have an annual charge so be sure to ask if there are any annual fees for holding a TFSA.  Also ask if there are any minimum balance requirements (i.e. do you have to keep a certain balance so that you don’t get charged fees)

The next thing you’ll want to know is what kind of transfer out fee they charge. For example if you are unhappy with either the service or you just want to change financial institutions, how much will you be charged if you want to switch.  All of the brokerage firms we reviewed charged anywhere from $60 to $150 to transfer out of a TFSA.  Be sure to also ask if they distinguish between partial transfer out and full transfer out.

One of the worst kinds of fees are those that are charged for accessing your money.  Only two brokerages we reviewed actually charged a withdrawal fee ($25), so be sure to inquire whether or not you get charged if/when you want to withdraw your money.

Lastly, for those individuals who would like to use their TFSA to trade currency or stocks or simply to hold US Dollars, make sure to enquire about whether they a) have a US dollar account for TFSAs and b) if there is any annual charge.

We’ve actually reviewed many of the brokerages’ TFSA offerings/costs and you can access that review by clicking here.

To find out more information:

Of course we wanted to provide you, the reader, with a great overview of TFSA’s.  There are some sites that we highly recommend you check to get the latest and most official information on TFSA’s.

The first is the CRA TFSA guide for individuals located here:

This is the official guide – so chances are if you have a question about TFSAs you can find it answered here although don’t expect too many great tips/strategies from it, it’s basically the rule book.

If you’re looking for great tips or strategies on how to use your TFSA, there are many great blogs/sites out there that can help.  A great book that will give you a comprehensive but very readable look at TFSAs and when they work best for you is by Gordon Pape.


Lastly, even though there may be some sales pitches that come with it, talking to your financial planner or your bank’s financial planner is very worthwhile.  There are usually free seminars at some point that banks provide but if not, booking an appointment can be a great way to get your questions answered.

The bottom line…

Regardless of what you’re saving for, whether it is that new roof, minivan or Bengal Tiger for the backyard, the “Mighty” TFSA is a way to keep your money working harder and smarter for you.

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Discount Brokerage Weekly Round Up – Sept. 21/2012

Discount Brokerage Weekly roundup:

The big news this week in the world of Canadian online discount brokerages was the release of the 2012 JD Power & Associates Canadian Discount Brokerage Investor Satisfaction Survey results.  With Disnat coming out on top, followed by BMO Investorline and National Bank Direct Brokerage, the survey showed that while Canadian discount brokerages are improving, they still have some catching up to do with their American discount brokerage counterparts.  To read more about the ratings, click here.

Canadian Discount Brokerage Tweet of the week:

@virtual_brokers for their article on protective puts

Event Horizon:

TD Waterhouse Discount Brokerage is planning a “trader’s expo” this weekend at the TD Waterhouse Investor Centre in Coquitlam. Details can be found here

The people have spoken:

An article about the launch earlier this month of the BMO Investorline AdviceDirect platform to assist retail investors has certainly stirred some investors up.

At the time of writing:

The top rated comment (25 points)from “TheBluesMan” : “1% is ridiculous for this arms length advice. Another cash cow for the brokerage.”

And the lowest rated comment (-4 points) from “EJJ”: “Ya, like I would listen to advice from a bankster. That’s hilarious!”

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3 lessons on investing Gangnam Style

gangnam-styleSpending as much time on the internet as we do here, we couldn’t help but come across the biggest craze to hit the internet since that cute Charlie Bit Me video.  If the suspense is killing you, we’re talking about none other than the video for Gangnam Style (OGS).  In a matter of just over two months this music video has garnered well over 220 million views (70+ million of which were hit the first day it was released) and is awkwardly galloping over other videos to become one of the most popular videos on the planet, already hitting number 1 on the Youtube Top 100 and on pace to surpass Carly Rae Jepsen’s Call Me Maybe in number of views (it already has more likes at this time of writing).

So, with so much hype behind the song, the artist and the dance, we couldn’t help but toss in 3 lessons for investors, Gangnam style.

Read on to find out more.