Here we are just a few days away from Christmas and while it seemed that things would settle down going into the end of the year, the discount brokerage world has been anything but quiet. In this week’s roundup, news of fees dropping from a major Canadian discount brokerage kicks things off. Next, the major story, an online brokerage in the US takes a stab at completely commission free trading. Finally, we round off with a trio of interesting topics for DIY investors courtesy of the Canadian investing forums.
National Bank Direct Brokerage Caps Fees
Earlier this week, one of Canada’s bank-owned discount brokerages, National Bank Direct Brokerage (NBDB), formally announced that they are making it easier for clients to qualify for exemptions to their annual administrative fees. The fee schedule change actually rolled out at the beginning of December, well ahead of the formal announcement.
Under this new structure, it will now be possible to be exempt from this $100 annual fee if clients either: make at least 5 commission-generating trades (either equity, ETF or option trades) between June 1st & May 31st or have personal assets of at least $20,000 as of May 31st. For more information, click here.
Startup Online Broker Robinhood to Offer Free Stock Trading
Yes, that is correct. A bombshell of an announcement came out of the US online brokerage market when startup broker Robinhood revealed that they are going to be offering commission-free stock trading.
While the details as to when the service will roll out and exactly who will be able to use it, the fact that pricing has now hit the ultimate low is cause for concern amongst discount brokerages in the US as well as in Canada. For now though the roll-out plan will be done in stages and in the US only for those states where the service meets regulators’ approval.
Whether or not this startup can succeed where others have stumbled (like Zecco) in offering commission free trading remains to be seen however one of the early investors in the company is Google Ventures, so for the moment they’ve got substantial support to try and roll out the idea. Click for more info or to sign up for the RobinHood account.
Here is a collection of articles that provide some additional information:
- Google-backed brokerage Robinhood to offer free trades – Marketwatch blog
- Robinhood Opens Investing Doors to Wall Street’s ‘Hood – TheStreet.com
- Robinhood’s pitch to millennials: free stock trading – VentureBeat
From the Forums
This weeks forums were abuzz with year end reflections and prognostications for 2014. Tucked in amongst the year end talking points were a couple of interesting threads on what can go wrong when transferring into/out of a brokerage account, using borrowed funds to invest, and keeping more than one brokerage around.
A Messy Breakup
While not a typical kind of occurrence, this post by one user in the Red Flag Deals forum describes their nightmare-like scenario of what can go wrong when switching trading account providers. Other forum users chime in to provide a more balanced view, however it serves as an important reminder that when moving account holdings between institutions, it is important to stay on top of the transition.
In the following post, the forum user ‘inverstmentmentjinja’ pitched the idea of borrowing money from a line of credit to invest. While borrowing to invest is a common strategy (especially on margin), read what the forum users had to say about some of the math used to support the strategy.
The More the Merrier
In this quick post, the user wants to know which other members have decided to have trading accounts at multiple brokers. The practice is actually quite common when retail investors want to either diversify who they have their money with, or want to use features at one broker that aren’t offered at another.
Tip of the Hat
That does it for this week. Have a safe and wonderful holiday season and thanks to everyone who’s made 2013 such a fantastic year for SparxTrading.