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Discount Brokerage Weekly Roundup – June 3, 2016

source: Giphy

In case you didn’t get the memo, it’s National Donut Day – oh and apparently there’s a bull market in commodities to mark the occasion. As we head into a new month, the headline of a ‘bull market’ in commodities is great news for Canadian traders, regardless of whether or not the rally sustains itself. For Canadian online brokerages, this could be the break they’ve been waiting for, so long as they’re able to get their story out over and above the Canadian real estate price craze that is dominating the news cycle.

In this week’s roundup, we take a look at the freshly baked offers from Canadian discount brokerages who are offering up deals to woo back DIY investors into the summer markets. Next, we take a look at one online brokerage who has grown its number of clients by over 250% since the great recession. From there we’ll take a look at the latest online brokerage related tweets and what DIY investors were talking about this week.

Sweet Deals are Made of These

With summer just around the corner, most people will be looking to take it easy. Not so at a few Canadian online brokerages drumming up interest with deals & promotions.

Heading into a new month the deals activity appears to have stabilized somewhat with promotions from Scotia iTRADE coming back online in May and a new deal from BMO InvestorLine launching at the beginning of the month to replace their outgoing spring promotion.

One of the interesting trends that seems to be picking up steam is the use of contests. Virtual Brokers was at it again with regards to running a contest, this time for their existing clients, offering up a contest entry for completing a feedback survey. The prizes: 3 draws for an Apple gift card (or a $500 deposit into their account).

As we had referenced last week, National Bank Direct Brokerage, RBC Direct Investing, Virtual Brokers and Scotia iTRADE all have contests going at the moment whereas the ‘cash back’ or ‘free trade’ offers continue to remain on hold.

For those looking for a deal or promotion from Questrade, the good news is that there are still affiliate-based offers to be had that provide cash back or free trades. Specifically, users can use this link for a $50 commission credit or check our deals section on referral offers for a cash back offering. (note: Sparx will receive an affiliate payment for either of these)

Now that the commodity markets (in Canada) seem to be signaling a bullish tone, it will be interesting to watch how or if discount brokerages will move quickly to capitalize on the attention.

Interactive Brokers Grinds Higher

In sports, whenever a team or an athlete goes on a winning streak people start paying attention. In the online brokerage world, however, things are a bit more, um, humble.

As we’ve highlighted in the past, the beginning of the month typically signals a point at which we can check in on the latest trading metrics at Interactive Brokers (since they are one of a few online brokerages in the US that actually report these figures).

For anyone keeping score, trading metrics for the month of May at Interactive Brokers were largely in line with activity in the year thus far: DARTs, client equity and credit balances were healthy. The only sign of an issue was with margin loan balances decreasing on both a month/month and year/year basis.

What was particularly fascinating in looking through these figures is the growth streak that Interactive Brokers has been on.

For some context, each month when these stats are published, there seems to be one number that keeps on growing: the number of total accounts. “How long has this been going?” we wondered since it has been that way for as long as SparxTrading.com has been around and then some. So we checked.

As it turns out, as of the data available (going back to January 2008), Interactive Brokers has been growing the number of users for the past 100 (yep) consecutive months which explains how they’ve grown their user base 263% from 97.2 thousand clients to 352.6 thousand. That despite the great recession/housing crisis, the hubbub in Europe over sovereign debt and all other market pullbacks along the way.

Interactive Brokers Account Growth 2008 – Present

For some context, the number of brokerage accounts at E*trade in April 2016 was about 3.2M so Interactive Brokers is certainly a much smaller player in comparison to its peers in the US and also in Canada. That said, in January of 2014, E*trade had 3M brokerage accounts so the percentage growth in brokerage accounts since then (~7%)  has been relatively flat whereas at Interactive Brokers client base grew 45% over the same period.

While all streaks must eventually come to an end, this is one is an interesting signal that a) investors are continuing to turn to DIY platforms for investing/trading and that b) Interactive Brokers must be doing something right when it comes to catering to active traders – who, incidentally, are the most highly prized (and profitable) client segment of the market for online brokerages.

Naturally their competitors and clients would want to know what their ‘secret’ is however as CEO of Interactive Brokers revealed, the ‘secret’ is a relentless focus on technological dominance and lowering the cost of trading execution.

As part of a recent communique to clients and again on their Twitter feed, they highlighted new order types available to clients – an adaptive algorithmic market order.

While it is a mouthful to say, the clip shown below demonstrates just how far ahead of the other brokerage players (at least in Canada) Interactive Brokers is when it comes to trading experience. A “smart” market order that can adapt to market conditions to get a little better of a fill price is indicative of the technical savvy of Interactive Brokers and also a sign that human traders are increasingly turning to machines/algos to help compete against the robots they’re inevitably trading against (their Accumulate Distribute Algo is also very interesting for any trading geeks out there).

With that in mind, it will be interesting what technology the other Canadian online brokerages embrace to provide active trading clients with in order to compete against other traders. Even more interesting, however, will be what technology the brokerages will embrace to compete against the robo-advisors that are also chipping away at their market share.

Discount Brokerage Tweets of the Week

An interesting selection of queries, comments and some shade this week. Mentioned are Questrade, RBC Direct Investing, Scotia iTRADE, TD Direct Investing and Virtual Brokers.

From the Forums

Making a Move from Questrade

As many DIY investors will confess, keeping multiple trading accounts offers the best of all worlds for features but not so much for convenience. In this post from RedFlagDeals.com’s Investing forum, one user is looking to consolidate from Questrade to BMO InvestorLine and receives an interesting answer worth considering.

Going Steady

Going the couch potato route is a popular approach for many investors. How well it works, however, can also be influenced by the commissions paid for ETFs. In this post from reddit’s PersonalFinanceCanada section, one user asks for comments comparing TD’s popular E-Series with ETFs and how regular (large-ish) contributions might factor in.

Into the Close

It’s finally Friday. There’s definitely no shortage of ways to enjoy this weekend from inside or out. While there’s no telling what next week in the markets soon – an interest rate hike isn’t likely to be one. As for exactly when, for that we need psychics. Now if we could only ask this duo (see video) when that hike will hit or have them around during earnings season, that would be something!

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