The latest offer put forth from Questrade is a sign that Canadian discount brokerages are gearing up to compete even more creatively for new clients. In this post we take a detailed look at Questrade’s commission-free-trade-per-month offer to see what consumers are being offered and what potential strategies might be at play from Questrade’s end.
What is the offer?
Questrade is offering new or existing clients one commission-free trade per month for either 12 or 24 months or for as many months as a client makes consecutive deposits of $1,000 or more (up to a maximum of 24 months). This deal is currently running until August 30, 2014.
There are 3 ways to qualify for this deal:
- Deposit $20,000
- Deposit $12,000
- Deposit at least $1,000/month for consecutive months
The offer is open to new and existing clients of Questrade however existing clients cannot use an existing Questrade account to fund a new account to qualify for the promotion.
Individuals can only use the commission-free trade for the month it is assigned to and there are no roll-overs or carry forwards. If a commission credit is not used in the month it is assigned to, clients forfeit that credit for that month. In other words, it is a ‘use-it-or-lose-it’ offer type.
Another important detail to keep in mind is that trading commissions will be charged at the time of a trade and then rebated back to the client within the first week of the month following the month in which the trade was placed.
What is the Value of the Offer?
The value of a standard commission at Questrade can range from $4.95 to $9.95 (excluding ECN or market fees) and the maximum value of a trade commission set forth in the deal’s terms and conditions is $9.95 per trade.
Since what clients get is a discount on a trade (as opposed to cash up front for example), one important assumption is that a client would, in fact, place at least one trade per month for consecutive months.
Let’s consider the available scenarios attached to this offer to see what clients receive for making a deposit:
Scenario 1: Deposit $20,000
Under this scenario an individual has to commit $20,000 of capital into their trading account. By doing so, they receive 24 commission trades (one free trade per month for two years). Hence, the value of the offer is capped at 24*$9.95 = $238.80 which represents 1.19% of the deposited amount over two years.
Scenario 2: Deposit $12,000
With this scenario an individual deposits $12,000 and receives 12 commission-free trades at the rate of one per month. The value of this option is 12*$9.95 = $119.40 which represents 1.00% of the deposit amount over one year.
Scenario 3: Deposit $1,000 a month consecutively
The last option available for this offer is for a client to receive one commission free trade per month for each month that a deposit of $1,000 or more is made. The value of this option is also about 1% over the possible time frame allowed with this option (which is 24 months). Importantly, if a client fails to make a deposit of at least $1,000 for consecutive months they no longer become eligible for any further commission-free trades as a part of this offer.