In part one of this series, we looked at which Canadian discount brokerages are currently offering commission-free ETFs as well as why commission-free ETF trading has started to become so popular. In part 2 of this series, we take a closer look at the types of commission-free offers available and provide some tips for investors who might be considering commission-free ETFs as part of their discount brokerage comparison research.
There’s commission-free and then there’s commission-free
While the term “commission-free ETF” does suggest a no cost transaction, in reality there are a couple of different interpretations as to what “commission-free” actually means.
|Company||Number of Commission Free ETFs||Minimum Trade Amount||Hold Period (minimum)||Details Link|
|All Canadian ETFs (>250)||$5000||1 business day||National Bank Direct Brokerage Commission-Free ETF Plan|
|60||$1000||1 business day||Qtrade Commission-Free ETF Plan|
|All ETFs* (only buys are commission-free)||$0||None||Questrade Commission-Free ETF Plan|
|50||$0||1 business day||Scotia iTrade Commission-Free ETF Plan|
|All ETFs* (only buys are commission-free)||$0||None||Virtual Brokers Commission-Free ETF Plan|
As the table above shows, there are several ETF commission models being offered by Canadian discount brokerages.
First, there are those discount brokerages that offer a limited selection of ETFs that can be traded commission free – as in commission-free to buy and commission-free to sell. The brokerages that offer this type of pricing are:
Thus the trade-off is that there might be true ‘commission-free’ ETF free trading but only on a handful of ETFs. There are also minimum amounts of time (often at least 1 business day) that an investor needs to hold the ETF in order to qualify for commission-free status.
Another variation on ‘commission-free’ ETFs are from discount brokerages that allow purchases of any ETF commission-free but will charge the normal commission charge on the sale of the ETF. Thus, only the purchase of the ETF is commission-free. The discount brokerages currently offering these types of commission-free ETF purchases are:
The offer from National Bank Direct Brokerage is slightly different in that it allows for unlimited commission-free ETF buying and selling but only of Canadian ETFs and only for a limited amount of time. Although commission-free ETF trading at National Bank Direct Brokerage is currently part of a promotional offer, depending on the response they receive from prospective clients, their promotion could turn into a standing offer in the future.
Whatever the model being used, it is clear that with any ETF commission deal from the Canadian discount brokerages, there are certain strings attached. For self-directed investors, it is important to understand the terms and conditions attached to the ETF commission pricing and be vigilant about the strings that come attached to these offers.