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Discount Brokerage Weekly Roundup – July 1, 2016

Happy Canada Day! The recent visit of US President Barack Obama to Canada underscored the importance of the two countries’ working relationship. Interestingly, at least one US online brokerage has managed to maintain its presence in Canada as part of its international expansion plan and the writing on the wall suggests that it won’t be the last US online brokerage to make a push north. For Canadian online brokerages, the clock is ticking and between the coming wave of robo-advisors and pressures to step up their game.

In this week’s roundup we take a look at the latest promotional offers to hit the deal wire at the outset of a new month. Following that we’ll review the latest metrics from one US online brokerage that should raise more than a few eyebrows at Canadian online brokerages. From there we’ll take a look at the latest chatter from Canadian investors around social media and in investor forums.

Deal Breaker

It looks like Great Britain wasn’t the only one making an exit this past week. The Canadian discount brokerage landscape saw yet another series of brokerages deciding to pull offers off the table at the roll-over into a new month. At the outset of July only one brokerage, Virtual Brokers, launched a new offer while brokerages such as BMO InvestorLine and Scotia iTRADE let their referral offers lapse. The biggest stories from this month’s deals and promotions section however concern Desjardins Online Brokerage and the state of referral programs.

Starting first with Desjardins Online Brokerage, it appears that their very long-standing promotion of offering up to $500 in commission credits for a $50,000 deposit has finally been retired. This offer initially launched back in 2014 and has been running strong ever since. There were various moments where the offer was scheduled to expire only to be renewed again for months at a time. With its removal, however, this leaves Desjardins Online Brokrerage with just a handful of offers.

One offer, for example, provides $50 in commission credits to DIY investors 18 to 30 years old. The other offers are directed toward individuals with assets over $500,000 as part of their ‘prestige’ program.  This puts Desjardins Online Brokerage in a tricky position given that their fiercest competitor, National Bank Direct Brokerage, has launched a margin account discount offer that includes lower trading commissions and lower borrowing rates for margin.

The second big story from the deals and promotions space at the outset of July is the expiration of referral programs by brokerages other than Questrade.

At the beginning of July, Questrade has the enviable position of being the only Canadian brokerage to be advertising a current referral program. Competitors, BMO InvestorLine and Scotia iTRADE both have refer-a-friend agreements listed on their websites but details on those offers clearly state the offers expired June 30th.

While it is unlikely that either Scotia iTRADE or BMO InvestorLine wish to concede market share by abandoning this low cost onboarding strategy, the evolving landscape of online brokerage promotions suggests that brokerages are prepared to take all kinds of creative approaches to lower their own costs to stay competitive.

Follow the Brexit Signs

While most investors dislike market volatility there are certainly others in the market place who look forward to it. One is definitely the media who took full advantage of the heightened anxiety with the Brexit referendum. The other group that enjoys market volatility are active traders. And, as seen with the outcome of the Brexit vote, there was ample market volatility to keep traders locked onto their screens.

For Interactive Brokers, June appeared to be a great month for their key metrics. Specifically, they saw an 8% spike in new accounts over the previous month which will probably earn the envy of their fellow online brokerages. Another interesting observation from the metrics report is the inclusion of the basket of currencies (and their respective weights) that Interactive Brokers manages. In particular, what is interesting is that Interactive Brokers operates in many international markets and that they are factoring in the relative importance of China to their business. This is not the first time this month a US brokerage has relayed the importance of China to their growth plans. Startup online brokerage Robinhood, who offers commission-free trading, announced they have expanded into China by partnering with Baidu (the leading search engine in China) to enable Chinese citizens to trade US stocks and ETFs.

Canadian online brokerages who are looking to attract active investors/day traders certainly have their work cut out for them in trying to compete with Interactive Brokers. As one of a small number of firms in Canada that offer international trading, Interactive Brokers continues to be a formidable online brokerage to compete with in the US, Canada and other international markets.

Discount Brokerage Tweets of the Week



From the Forums

Solid Platform

Trading technology being what it is in Canada is somewhat limited. For one online investor in this reddit post, figuring out what else is out there prompted some interesting suggestions and reviews from fellow community members.

R is for Reliability

For serious investors, price is one thing but reliability is paramount. Being able to get into and out of a trade how and when you need to can be worth the few extra dollars per trade – think of how expensive the alternative can be. In this post on the Canadian Money Forum, one DIY investor pitches the question of ‘which brokerage is most reliable’ to the crowd and gets some interesting perspective in return.

Into the Close

That’s a wrap for this shortened trading week. Have a safe and enjoyable Canada Day weekend, and of course, for those who decide to trade the US markets a quick reminder that Monday will also be a day off trading the US markets. As a shoutout to the recent visit from US President Obama, here’s a video of recent address to parliament.


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