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Discount Brokerage Weekly Roundup – May 25, 2020

It’s likely a sign of the times, but what we see and hear on the news is so vastly different depending on where we live. And, even though we are all living through the collective experiment of lifting restrictions, we are starting to learn more about the unforeseen consequences of COVID-19 as well as the fact that in spite of it all, the world continues to move and people in it continue to want to push forward.

In this edition of the Roundup, there is a lot of news to digest. Up first is a continuation of the wave of information that continues to wash ashore treasures of data that reveal why online brokerages in both Canada and the US may be busier than they’ve ever been, in spite of the economic mayhem playing out on both sides of the border. Though that is a hard act to follow, there is even bigger news that broke this past week in the Canadian online brokerage space, as two new brands get set to enter the discount brokerage pool, making it ever harder for Canadian online brokers to safely keep their distance from one another. As always, we’ll close out by highlighting chatter from across the DIY investing forums and from Twitter.

Chequing the Data: Why Discount Brokerages are So Busy

After being sheltered in place for several weeks, cities and economies across North America are cautiously venturing back into a “new normal.”

While most organizations and individuals are looking forward to getting things back on track, the COVID-19 pandemic has shown that the experience of social distancing was not evenly experienced across the economy. Although many companies found themselves having to shut down, there were others that were able to continue via “remote work” and which fared much better than expected.

For online brokerages, it has been busier than ever during the market turmoil and accompanying shutdowns. The reopening of many economies may represent the end of historic participation by investors in the markets, and as a result, trading levels may drop off. Of course, what led to this level of activity is starting to become clearer, although the consequences remain to be fully understood.

While it is difficult at the best of times to know exactly what drives investors into the market, in the recent market run-up from March lows, a theory gaining steam is that the jump in investor participation is a combination of more people working from home (or being forced to stay home), a lack of major sporting events to bet on, and, perhaps most ominously, government support cheques.

Data gathered by a story published in the Financial Times explains much of what we have been covering over the past several weeks: that online brokerages in the US have seen record growth in the number of new accounts as well as in trading volume. What was especially interesting in this article, however, was what appeared to be motivating individuals trading in the markets in both the US and Canada.

On the US side of the border, the FT article cited examples of prominent sports-betting personality Dave Portnoy, who founded Barstool Sports, jumping into stock trading with E*Trade. The fact that he commands a significant social media following and was also featured on CNBC serves as an indicator for a much more common persona of “investor” at this time. The portrait of the “everyday” investor stuck at home with nothing else to do and making lots of money is a tempting (and familiar) trope of the stock market.

It was a mention of what was happening in the Canadian market, however, that is likely to raise more than a few eyebrows.

Below is the excerpt from the FT article. What stands out from this passage is that there are Canadians who are jumping into online trading and potentially using government stimulus to do so. To boot, the online brokerage happened to be RBC Direct Investing.

In fact, this article isn’t the first or only source to suggest this. Another reference to this behaviour was cited in an article by popular financial personality Garth Turner several weeks ago.

It’s not just in Canada, either, that stimulus cheques are being used to jump into the stock market. A recent report mentioned on CNBC about where stimulus cheques received by Americans ended up getting spent found that individuals with incomes between USD $35K to $75K increased their spending on stock trading by over 90% compared to the week before they received their stimulus cheques. The article went further to state:

“Exact reasons for that surge in interest is unclear. Most analysts chalk it up to the attractiveness of the market comeback, but it appears the stimulus money at least played a part.”

Regardless of the source of coverage, there seems to be a consensus that there have been investors participating in the stock market who might not have the same depth of understanding of risk management as traditional investors would. As a result, the “experts” forecast greater volatility ahead as either more investors pile into a rally at its later stages or retreat at the first sign of weakness.

For online brokerages on either side of the border, COVID-19 has generated a substantial level of trading activity and interest in trading online. The unintended consequences of the emergency relief funding provided by governments have resulted in a number of DIY investors in both countries opening new accounts or funding existing accounts.

While there have been cycles in the past where stock market run-ups have attracted fast money (in particular from younger investors/traders), it does beg the question as to what online brokerages will be doing to prepare for the inevitable fallout.

Almost 20 years ago, day trading met its match in the dot-com bubble. Ten years ago, there was an enormous financial crisis that ingrained skepticism among a generation of investors. This time may not be different in terms of investors getting ahead of fundamentals, but there will almost certainly be tough lessons to learn considering who has been drawn into the market and what they have been drawn into it with.

Newish Kids on the Block: More Discount Brokerages to Choose From

The Canadian online brokerage space is undoubtedly a crowded one when it comes to providers for online trading. With 13 brokers serving a relatively small population of investors, the business case for online brokers is a challenging one. It is likely the reason why, outside of one or two online brokerages in Canada, the current suite of providers are subsidiaries of much larger financial firms. In the online brokerage business in Canada, scale is essential to survive.

These past few months, it has been interesting to observe who among the online brokers in Canada was actively attending to the “growth” functions of their business and who was not.

For example, we’ve been watching who has been launching new features, updating their website with important messaging related to COVID-19, advertising online as well as creating content for investors. Despite the calm and perhaps lack of movement on the front end, this past week revealed a lot about why activity appeared to have dwindled at a couple of Canadian online brokers.

The first big story announced this past week was that CI Financial is going all in on acquiring the popular roboadvisor WealthBar (in which they had already held a 75% stake). CI Financial acquired BBS Securities, parent to Virtual Brokers, in 2017 and since then has been working on an important digital-transformation business initiative, which means the development of the front end and brand of Virtual Brokers has been slower than has historically been the case. Interestingly, the reason for the reduced pace of activity may now become clearer as the announced acquisition also revealed that CI Financial will be launching CI Direct Investing, which will ultimately replace Virtual Brokers.

Taking what has been a household name (Virtual Brokers) and rebranding it into a new entity will be a challenge and likely require a considerable investment of marketing resources. However, with a diverse wealth-management offering that now includes the roboadvisor and direct-investing services in combination with a significantly sized parent company, bank-owned brokerages will undoubtedly have to adjust course. Slides from an investor presentation earlier in the month reveal the new look and organization of the self-directed investing arm at CI Financial as well as motives as to what drove the decision.

Another big story that broke last week was the news that Morgan Stanley will be launching a wealth-management business in Canada that will include, among other services, a self-directed investing platform – aka discount brokerage.

Earlier this year, Morgan Stanley also made a bid to acquire online brokerage E*Trade Financial, and while still awaiting regulatory approval, this could set the stage for the return of this online brokerage to Canada. Interestingly, as part of its strategy to broaden its wealth-management offering in Canada, Morgan Stanley will be working with Canaccord Genuity as its local platform provider that will be delivering clearing, custody, and wealth-management solutions. It is worth noting that Canaccord Genuity acquired online brokerage Jitneytrade last year and launched a rebranded online brokerage Canaccord Genuity (CG) Direct.

With new online brokerage brands in play in the Canadian discount brokerage market, it is going to once again push existing online brokers to accelerate their plans to innovate and to create experiences and incentives to attract DIY investors’ attention (and loyalty).

Though CI Financial is certainly a formidable wealth-management entity, there will be challenges to break into the DIY investor market, especially via the Virtual Brokers brand and experience. On the other hand, the return of an iconic online brokerage brand like E*Trade would make a huge splash in DIY investor circles.

Many Canadian DIY investors, young and old, have heard of both E*Trade and Morgan Stanley, which will pose a serious challenge to existing Canadian online brokerages – including the bank-owned brokers. And, it is worth mentioning that E*Trade offers commission-free trading, which, if they do come to the Canadian market at that price point, would be a watershed moment for commission pricing for Canadian DIY investors.

Despite what appeared to be a slowdown in activity on the front end of certain online brokers, there clearly have been major developments taking place behind the scenes. For existing online brokerages, the race is now on to contend with at least two new incarnations of serious competitors. Of course, it doesn’t stop there, either. Morgan Stanley’s moves won’t go unnoticed in the US wealth-management space, and there will be a number of other providers who may be running their own assessment of competing against the financial giant on Canadian soil. So, as big a story as this is, these new developments could spark an even more volatile time for the Canadian online brokerage space. Talk about a new normal.

Discount Brokerage Tweets of the Week

From the Forums


In this post, a curious DIY investor looks to the big picture to determine whether or not gold is a solid investment, and fellow forum users weigh in on the story that the numbers might be telling.

Just Deserts

A Redditor turns to the forum to ask the question “What would be your desert island ETF?” in this post.

Into the Close

With all that has already happened in just a few months of 2020, it’s hard to believe that there are any more surprises left. And yet, here we are. Just a few days away from the end of May, and even against the backdrop of pandemic lockdowns, the online brokerage space in Canada is poised to radically transform yet again in the year ahead. While the news is certainly focused on what’s taking place in the near term, there are already rumblings of a second wave. Given everything that has surfaced about the DIY investor market this past week, the only advice at this point is to enjoy whatever calm takes place. It doesn’t seem like it’s going to last for too long.

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Discount Brokerage Weekly Roundup – May 18, 2020

To all the Canadian traders who went long on fun this weekend, the latest performance by US and international markets while the Canadian markets were closed is a mixed blessing. With the bounce-back rally in stocks still going and some stocks even notching new highs, it certainly goes to show that demand for equities – perhaps certain equities – is outpacing supply. For online brokerages, interest in stocks and trading bodes well, but the surge in demand also presents its own mixed blessing.

In this shortened edition of the Weekly Roundup, the US online brokerage market continues to be in focus, in part with new information provided not just on the brokerages but also on DIY investors themselves. Dive in for a closer look at the choices DIY investors are making when selecting an online brokerage and what that might mean for Canadian discount brokerages planning upgrades and feature roadmapping. As always, be sure to check out the latest comments from Canadian DIY investors on Twitter and in the investor forums.

Trading Just Got Trendy

A familiar phrase in the stock market is that the trend is your friend (until it ends). One of the trends that regular readers of the Weekly Roundup may have picked up on over the past several weeks is that there has clearly been a shift in the world of DIY investing. This shift has resulted in investors and capital flooding into stock markets, despite the grimmest of circumstances and darkest of economic backdrops. What gives?

The honest answer is that nobody really knows. Yes, there are good theories, but they are just that. What is becoming clear, however, is that the evidence emerging from the US online brokerage market, as well as some peripheral data from the Canadian online brokerage space, points to “younger” investors jumping into the markets to snap up iconic names that have been pummeled by pandemic-related selloffs.

Meanwhile, there is also a narrative about “older” investors either shrugging off the news or trying to get their portfolios to stem the losses by moving assets into “safer” or less volatile positions. The result appears to be a matrix that is defined on one axis by risk tolerance and the other by age. Younger investors with higher risk tolerance (or perhaps who aren’t fully aware of the risks related to investing in “discounted” stocks) are pushing markets and online brokerages higher.

This past week, two interesting articles published on the US online brokerage market appear to validate stories we’ve been tracking for several weeks about the explosion in online brokerage account openings and provide additional insight into online brokerages and the sentiment among DIY investors. And, though this data is based on what is happening in the US, it does provide a proxy for what Canadian online brokerages ought to consider when making decisions about the expectations of investors – new and experienced.

The first article, published on Investopedia by a long-time analyst of the online brokerage industry in the US, Theresa Carey, scanned different US online brokerages and provided quick updates from each. While it was interesting to read about feature releases taking place over the past few weeks and trading data, what was especially interesting to home in on was the qualitative information reported on about younger investors.

Data about Robinhood’s spike in account openings was already reported on in a previous Roundup in late April. Nonetheless, it is worth repeating that the spectacular figure of three million account opens in the first quarter of 2020 cited in an article by CNBC drives home the scale of the interest in trading online as well as the popularity of Robinhood when compared to competing online brokerages.

Additional data about trading volume at Robinhood being almost triple that of Q4 2019 and that 72% of orders were buy orders reveal that not only were investors more active but that the falling prices were an opportunity to buy into hard-hit names as well as tech giants alike.

Another interesting development that didn’t get too much coverage, however, was an announcement by Robinhood that they would be rolling out a new look.

Normally, the announcement of a new look by an online brokerage would not generate a significant level of commentary on social media. But, these are not normal times, and in the case of Robinhood, this is not a “normal” online brokerage.

For background, in addition to being recognized as a leader in low-cost (aka zero-commission) trading, Robinhood is perhaps best known for award-winning design and user experience. As such, changes to design were likely to prompt some kind of response from their more design-sensitive clients. And prompt they did.

Judging from the response to the teaser tweet, it was interesting on several levels to see how much excitement the prospect of a new look generated from Robinhood. In particular, the number of users who took it upon themselves to post a comment on Twitter (rather than lurk or like) reflects a user base that has strong feelings about design choices. Even something as seemingly simple as colour scheme matters to Robinhood users in a way that perhaps investors more accustomed to spartan or utilitarian designs of trading-platform offerings do not care about.

Diving through the comments to the Robinhood tweet is likely to yield tips worth considering when designing for an aesthetically sensitive audience of (likely) younger, potentially active investors (hint hint, Canadian online brokerages).

Beyond design and account openings, there was another important insight about younger investors revealed in Carey’s article. E*TRADE conducted a survey among their clients (who had more than $10,000 in their accounts) that found Gen Z and millennial respondents were more concerned with their portfolio performance than with their health. Further, the proportion of individuals checking their portfolios at least daily was 54% for those under 30 compared to 29% for those older than 30.

Although not stated explicitly by E*TRADE, it is a safe bet that younger investors would also be logging in to their accounts via mobile app on their phones rather than on a desktop or tablet, especially when accessing account information multiple times a day.

The implication of these additional data points about the current state of online investing is that mobile experience and technical design choices are going to be critical determining factors for investor satisfaction. That said, while catering to younger investors is key to future growth, there is a significant portion of existing/older clients who will have different preferences, and those also need to be accounted for when it comes to planning the user experience.

Perhaps an important lesson on keeping user accessibility top of mind came from a series of comments on the new Robinhood colour scheme that apparently makes it more challenging for individuals who have red-green colour-blindness to easily read or distinguish data on-screen. This is a particular issue for many stock platforms, considering the standard rendering for gains and losses use those two colours.

As for why younger investors and why now, the “reasons” provided  thus far cite contributing factors such as: more people staying at home, more time, potentially money being saved from dining out, a dearth of opportunities to “gamble” or speculate, as well as the lowering of barriers at online brokerages with zero-commission fees.

Here is our (speculative) take. The influx of “young money” may be part of a recurring trend related to the kinds of opportunities millennial or Gen Z investors wish to invest in. When the cannabis sector was initially legalized (in Canada), a dramatic shift occurred. All of a sudden there was a “new normal” in what was previously an inaccessible or illegal market. In terms of the stock market, it took about three to four years for that story to become mainstream and hit “mania” levels. When the digital currency bitcoin finally hit its stride, it too ushered in the prospect of a “new normal” with respect to the world of finance and the way money can be transacted. The result: a massive rush into cryptocurrencies and blockchain.

Now, with the impact of COVID-19, there are once again huge shifts to the economy taking place in a fairly short amount of time, which is exactly the trade that younger investors are banking on to catalyze wealth creation in a way that older investors may not have the risk appetite or understanding for.

In other words, “new normal” is a signal for tremendous growth in a short amount of time and one that younger or more risk-comfortable investors are keen to capitalize on. And within the past five years there have been at least two of these events. Any feelings of FOMO that have been pent up, and any folks who may have been burned by “speculative” stocks, result in an opportunity to buy into “safer” stocks at a deep discount with the latest stock market sell-off.

While there are likely many reasons that can help account for the surge in interest in investing, the fact this surge exists is undeniable. The consequences of this surge have also yet to be fully understood.

What does it mean to have so many new clients show up so quickly? What characterizes these new clients compared to other existing online investors? What changes will online brokerages need to make to accommodate this new stakeholder group while also delivering on their brand promise to existing, valuable, long-time clients?

For Canadian discount brokerages, in addition to COVID-19 creating a new operating normal, there is undoubtedly another new normal in servicing clients. The key question to online brokerages: will this new trend be viewed as a challenge or an opportunity?

Discount Brokerage Tweets of the Week

From the Forums

Right Place, Right Time

A curious DIY investor asks for words of wisdom from other investors who will be re-entering the stock market in 2020 for long-term holds. A lively discussion ensues, with fellow forum users sharing their long-term investment plans and the logic behind these plans, in this post.

For “Bettor” or For Worse

One DIY investor turns to the forums to ask why bank stocks are not recovering to their pre-Coronavirus crash values as quickly as other stocks. Fellow forum users weigh in and discuss the variable contributors to this matter, including debt levels and loan losses, in this post.

Into the Close

With oil prices continuing to drift higher, COVID lockdowns easing, and the markets continuing to melt upwards, the start of the week has an air of optimism to it. Of course, it being spring, there are also many bears watching the market in awe of the backdrop against which market prices are rising. The voices of fear are getting louder among pundits yet, ironically, quieter with the volatility index, for now. At some point fundamentals may kick in, but for now, hope for a return to a new normal is high demand. Stay safe and have a profitable week!

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Discount Brokerage Weekly Roundup – May 11, 2020

Despite what most people, Garfield included, seem to think about Mondays, the good news is that this week isn’t last week. With historic job-loss data being reported, the good news is that hopefully the worst bad news economically is now behind us. Surprisingly, trusting the numbers is now a theme appropriate to the news and to the latest developments among online brokerages.

In this edition of the Roundup we dive into an interesting tale of how a trade gone bad exposes deep vulnerabilities and risks for DIY investors to consider. Next, we take a look at another big online brokerage releasing a very popular feature. As always, we’ve got a selection of comments from investors on Twitter and in the forums.

Outnumbered: Traders & Interactive Brokers Bitten by Computer Bug

Online brokerages play an interesting role in the capital markets ecosystem. They are, by some measure, the gatekeepers to individual investors being able to directly access opportunities in securities marketplaces.

In “normal” times the system tends to work, albeit with the occasional hiccup. When there are surges in demand, as DIY investors have witnessed this year and in prior years at many Canadian discount brokers, things tend to get less reliable. To correct some of this instability, brokerages have either resorted to taking their trading systems offline (or the systems themselves are being forced offline) or instituting some rather unusual moves, like Wealthsimple Trade forcing clients to wait “their turn” to be able to trade once they’ve opened and funded a new account.

As awful as these situations have been for online traders, one of the perils that didn’t really ever seem to be in the minds of traders is whether or not the information they were watching – specifically data about price – was accurate. It was this specific issue, however, that was apparently behind the spectacular loss that Interactive Brokers had to incur when one of its Canadian clients managed to turn a $77,000 gain into a $9 million dollar loss as the price of oil futures contracts turned negative in April.

The story is a must read for any DIY investor who trades on margin and, in particular, with any kind of leverage. And, it will almost certainly become the stuff of active-trader folklore. That said, it shouldn’t only be DIY investors who read the story – Canadian discount brokerages should take heed as well.

For starters, it should prompt a review of code and technology systems to be able to accommodate what might be unthinkable conditions in the market. Nobody at Interactive Brokers had configured their system to work with negative prices in the oil contract. For some context, Interactive Brokers is arguably the best of breed when it comes to technology and automation among online brokerages in North America. It does raise an important question: if such a technically capable brokerage can “miss” things, what do less capable systems currently have configured in their code?

To their credit, Interactive Brokers is owning up to it and will be reimbursing customers who were locked into long positions when prices had moved beneath zero. This is (currently) forecasted to cost Interactive Brokers about USD $110 million. While they are taking the initiative to process “refunds,” they are certainly not happy about it. Founder and retired CEO Thomas Peterffy did raise an important question: who, exactly, should be held responsible for individual investors – especially smaller investors – being given access to securities like the oil contracts in which liquidity becomes drastically reduced as contracts head to expiry?

Another important set of details to emerge from this story is the fact that the age of the trader who incurred this loss was 30 years old. To put a finer point on it, a millennial investor managed to get himself into an almost unimaginable position. Similarly, the other trader referenced in the story was someone trading on behalf of a couple of friends. While both of these details might seem trivial, it does characterize what happens when less sophisticated traders are given access to complex trading products. Even with the risk disclosures in place, the stampede of novice or newer investors to the stock market means there are many more stories like this that have either already happened or are waiting to emerge from another yet-to-be-imagined scenario. Younger or more aggressive traders can get into serious trouble, so the challenge to online brokerages is to find a way to have safety mechanisms in place – no small feat.

COVID-19 has had far-reaching effects on the economy and on society as a whole. For DIY investors, however, the economic consequences have brought into focus the vulnerability of online brokerage systems as well as the systems they interface with. It is surreal to think that even the data streaming in real time might not be accurate, but that is what can happen.

For Canadian DIY investors, it will be difficult to build trust in the technology and systems related to online trading without a transparent record of system stability. Wealthsimple Trade, for all of its recent hiccups, puts their system uptime and incident history out there for the world (and investors) to see. As much as society is focused on testing as a path forward to returning to normal, it seems that Canadian online brokerages should be investing in testing their platforms and systems too.

A Slice of Dice: Schwab Offers Up Fractional Share Trading

Some of the most popular names in the stock market are also among the hardest to access. Names like Amazon, Apple, or Alphabet are more than just stocks that begin with the letter A, they’re also stocks that cost in the hundreds or thousands of dollars each per share. For most beginner or younger investors, this presents a hurdle to participating in stock trading by using the approach of investing in things you understand.

This past week, another US online brokerage joined the trend of making fractional share trading available to customers. Charles Schwab announced that they are gearing up to launch their fractional share trading service, named Schwab Stock Slices, against the backdrop of unprecedented volatility and interest in the stock market.

Schwab joins Interactive Brokers, Fidelity, and (eventually) Robinhood in launching a fractional share trading programs in the US, a feature that is picking up significant momentum with users online. With the new program from Schwab, investors can purchase fractional shares with as little as $5 and up to a maximum of $10,000.

With so many online brokerages chasing the elusive “younger” demographic of investor, the fractional share trading program lowers the barrier to participating – something that younger Canadian DIY investors on social media and the forums often bump into. Conversations about diversification usually result in DIY investors turning to ETFs; however, with fractional shares, it is possible to achieve diversified status even with modest savings.

If ever there was a time to offer and advertise this feature, it seems like it would be now. Younger investors are coming into the market at a historic pace. Additionally, as with many features that get launched in the US, the natural question is whether or not this kind of feature can be deployed by Canadian discount brokerages.

Despite the diversity of tactics to reach a younger investor – from social media to digital advertising – online brokerages in Canada haven’t, in large part, lowered the barrier to participating in some of the most exciting names in the stock market today. That, it seems, could prompt another wave of interest and engagement with investing, since it makes trading financially accessible to active and passive investors alike.

Discount Brokerage Tweets of the Week

From the Forums

Honey, I Inflated the Market

A curious Redditor poses the question of whether federal spending and CERB might cause inflation, and a lively discussion on various schools of economic thought on the matter ensues in this post.

Blind (Liqui)Date

A young investor asks for advice on whether to liquidate their investments and transfer to an online brokerage in this post. Fellow Redditors offer their advice and experiences having opened an online brokerage account during a volatile market.

Into the Close

That’s a wrap on another historic week of market activity. Unemployment rates and the general shock to the economy might be making headlines, but stock markets continued their ascent, nonetheless. And  if FOMO wasn’t kicking in already, there’s clearly a case of market envy at play as certain stocks put in new highs and push into record territory (ahem, Shopify). So, if we needed yet another reminder that we don’t live in normal times right now, the push higher by stock markets even despite the direst economic news will almost certainly instigate other investors to join in the fray.

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Discount Brokerage Weekly Roundup – May 4, 2020

Here we are at the beginning of a new month. If the old adages are to be believed, then May is where we can look forward to flowers, and when investors would typically sell and look to return in the fall. Of course, those would be in normal times, and with many of us still parked at home, the rule book for this May is going to be anything but typical.

In this edition of the Roundup, we continue to digest the numbers on the popularity of online investing being shared and what those numbers help to explain about the current state of online brokerages in Canada. From there we examine the current state of the deals and promotions being offered at the beginning of a new month and speculate on what the “new normal” is shaping up to look like for deals from discount brokerages. As always, there’s a healthy serving of commentary also included from DIY investors on Twitter and in the forums.

Waves of Interest

The big story in the online brokerage space these past two months has been heavily focussed on numbers. Notably, the numbers of DIY investors – be they active traders or first-time investors – who have been jumping into the stock market, in spite of the sharp declines in stock prices and unprecedented volatility.

With the start of a new month, Interactive Brokers has once again released their trading activity metrics, which offer a unique window into the behaviour of investors and the business conditions of online brokerages.

The metrics published by Interactive Brokers show that there were 46 thousand net new accounts opened, an increase of 15% over the prior month and an incredible 461% increase over the same period last year. In fact, there were more online brokerage accounts opened at Interactive Brokers in April than there were in the last six months of 2019 combined.

Digging further into the numbers published in their press release, it is also possible to see magnitude and direction of activity by investors across April and March. For example, there were 7.2 million buy orders compared to 5.64 million sell orders. To put these numbers into context, these are about 2 – 2.5 times higher than the 2019 average in each category.

The growth in new accounts and the surge in trading behaviour provided by Interactive Brokers’ figures puts what’s been happening here in the Canadian discount brokerage space into sharper focus.

Although different in absolute numbers, on a relative basis the flood of new accounts and trading volume implies that Canadian online brokerages had a VERY good past two months in terms of revenue generation and asset gathering. Unlike their counterparts in the US, Canadian discount brokers haven’t dropped their commission rates to zero, so total revenue gained should be substantial.

Indeed, messages from DIY investors on social media about delays in getting new accounts opened, as well as messages on the websites of Canadian online brokerages communicating delays due to higher-than-normal volumes, once again validate the idea that the sheer volume of interest has overwhelmed many service channels.

Out of curiosity about the delays experienced by clients when attempting to reach an online brokerage by phone, we looked at the open job postings for client service reps for the online brokerage arms of a few of Canada’s largest bank-owned brokerages. The surprising finding in this quick scan was that there were only two of the big five banks with active postings for their wealth management (i.e. online brokerage) divisions. Of further interest, at one of these brokerages, the training program is an intensive full-time commitment of 20 weeks. What this implies is that if Canadian online brokerages that are experiencing severe delays in responding to clients haven’t already done so, hiring into the role of client service is going to be a challenge (especially if everyone does it at once), and the turnaround time for a fix is not going to be short.

As has been reported in Roundups in the past few weeks, these unprecedented times in the stock markets and economies have, almost counterintuitively, resulted in a watershed moment for account openings and trading volume.

Canadian online brokerages, despite their higher commission structures, are facing a huge surge in account openings and a revenue windfall from active trading. It remains to be seen which online brokerage in Canada can successfully deliver consistently positive client service at scale and, more importantly, seems interested in prioritizing doing so. A quick scan of the open job postings at Canada’s largest banks shows that, at this point, hiring more customer service agents to assist specifically with the online brokerage segments of their business isn’t a priority.

While deploying more people to assist with growth is one strategy, the numbers from Interactive Brokers – which counterintuitivelyis arguably the online brokerage most committed to automation – have shown that having a highly scalable business structure pays for itself. Their ongoing investment has enabled Interactive Brokers to accommodate and process new accounts at a rate much faster than online brokerages with less automation to their system.

Whether Canadian online brokerages are, at the moment, content to grow at their own pace or are simply unchallenged to do so more quickly, one thing is clear: the longer it takes DIY investors to open accounts when markets present opportunities, the more likely DIY investors will send their assets and trades to an online broker that can execute on this quickly.

Deal-ayed Gratis-fication

Normally, the start of a new month would be the opportune time to recap the deals and promotions being offered by Canadian discount brokerages. These are not normal times, however. With the start of a new month, the deals and promotions being offered by Canadian discount brokerages are largely the same as they were during April.

The current deals-and-promotions landscape for cash-back or commission-free trade offers is dominated by two firms: Questrade and BMO InvestorLine, with the latter being the only big Canadian-bank-owned brokerage to be running a cash-back promotion offer.

The most popular category remains the baseline transfer promotion, which provides reimbursement of transfer-out fees that most online brokerages charge when moving accounts to another provider.

With demand being as strong as it is, and Canadian online brokerages struggling to keep up with processing new account sign-ups, there has clearly been a shift away from most Canadian discount brokerages offering deals or promotions to incentivize DIY investors to sign up for an account. Interestingly, it seems that awareness-based marketing campaigns are being run at the moment, with advertising by TD Direct Investing, Scotia iTRADE and Qtrade Investor showing up on social media feeds.

The takeaway appears to be that while online brokerages are “open for business,” it is not business as usual. At this point, the speed with which an account can be opened and opportunities seized upon takes precedence over the incentives that determine where an online investor turns to – at least for many investors. Translation: FOMO is firmly in control. Of course, commentary by both (and only) Questrade and BMO InvestorLine about the successful rates of account opening may simply be coincidental to their marketing efforts through the big drop and bounce.

As for what happens next from here, it is likely that larger online brokerages enjoy the benefit (and challenge) of being large and don’t have to provide incentives unless they are really interested in capturing market share. For smaller online brokerages, it is clear that this ought to be a time for leaning into the attention that more DIY investors are paying to the space. With online brokerages deferring their promotions, at least for the time being, once things “normalize” from an investing standpoint, it seems like offers could become hyper-competitive. There are still many unknowns on the promotions front, but looking at the big picture, the competition for new customers for financial services and online investing is going to be a lot tougher than it was heading into the COVID-19 pandemic.

Discount Brokerage Tweets of the Week

From the Forums

Oh, Canada

A Redditor asks, “Why should I continue to invest in the Canadian market?” in this forum post. Fellow users rally around the benefits of hedging investments by putting money in the Canadian and US markets and warn the poster to be wary of recency bias.

Speculation Nation

In this post, a user invites the forum to speculate which companies may go bankrupt as a result of the turbulent markets.

Into the Close

For better or worse, stock markets are always forward looking. This week, however, there may not be a lot to look forward to except heightened uncertainty. The math on unemployment figures in Canada and the US is terrible, and as far as plans to “restart” entire economies, it will be anything but smooth. Markets, for now, seem to have digested a lot of very bad news and are priced on the expectations that things will be resolved in some sort of orderly fashion. This week will certainly test that thesis.

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Discount Brokerage Deals & Promotions – May 2020

As the saying goes, April showers bring May flowers. After a whirlwind of unexpected changes in the last month, resulting from the global health and economic crises, there appears to be an increase in DIY investor confidence when it comes to stepping back into the markets.

Despite current market volatility, there has been a recent surge in interest and activity from DIY investors. As reported by discount brokerages, trade volumes, account openings, and customer outreach have all increased. In addition, the significant drop in oil prices has prompted even more investors to step out of the darkness to take advantage of the volatility swings.

Even though flowers are blooming all around us – and investor interest has also been flourishing – Canadian discount brokerages have, in contrast, stayed mum about any new promotion activities for May. Perhaps the reason for this is because brokerages are struggling to keep up with the growing call volumes and, for some, subsequent system outages. Or perhaps brokerages are attributing their familiar offerings to another well-known saying: If it ain’t broke, don’t fix it.

Nevertheless, investors who are brave enough to dip their feet into the market waters can scroll on to review the current deals and promotions activity from Canadian discount brokerages this May.

As always, Sparx Trading will add new deal updates as they appear throughout the month, so be sure to check back.

Expired Deals

No expired deals to report at this time.

Extended Deals

No extended deals to report at this time.

New Deals

No new deals to report at this time.

Discount Brokerage Deals

  1. Cash Back/Free Trade/Product Offer Promotions
  2. Referral Promotions
  3. Transfer Fee Promotions
  4. Contests & Other Offers
  5. Digital Advice + Roboadvisor Promotions
  6. Offers for Young Investors

Cash Back/Free Trade/Product Offer Promotions

Company Brief Description Minimum Deposit Amount Commission/Cash Offer/Promotion Type Time Limit to Use Commission/Cash Offer Details Link Deadline
Open and fund a new account (TFSA, Margin or RRSP) with at least $1,000 and you may be eligible to receive $88 in commission credits (up to 17 commission-free trades). Use promo code SPARX88 when signing up. Be sure to read terms and conditions carefully. $1,000 $88 commission credit 60 days Access this offer by clicking here: $88 commission-credit offer . For full terms and conditions, click here. none
Open and fund a new account (TFSA, Margin or RRSP) with at least $1,000 and you may be eligible to receive 5 commission-free trades. Use promo code 5FREETRADES when signing up. Be sure to read terms and conditions carefully. $1,000 5 commission-free trades 60 days 5 commission-free trade offer December 31, 2020
Open and fund a new qualifying account with at least $25,000 and you may qualify for one month of unlimited commission-free trades and up to one month free of an advanced data package. Use promo code ADVANTAGE14 when opening a new account. Be sure to read terms and conditions for full details. $25,000 commission-free trades for 1 month + 1 month of advanced data. 1 month Active Trader Program December 31, 2020
BMO InvestorLine Open a new qualifying account at BMO InvestorLine with new assets worth at least A) $50,000; B) $100,000; C) $250,000; D) $500,000 or E) $1M+, and you may be eligible to receive a cash back reward of up to A) $250; B) $450; C) $800; D) $1,000 or E) $2,000. Use promo code SPARXCASH when registering to qualify. Be sure to read full terms and conditions. A) $50,000 B) $100,000 C) $250,000 D) $500,000 E) $1M+ A) $250 B) $450 C) $800 D) $1,000 E) $2,000 Cash back will be deposited week of December 14, 2020 BMO InvestorLine Cash Back Offer Details June 1, 2020

Expired Offers

Last Updated: Apr. 30, 2020 16:20PT

Referral Promotions

Company Brief Description Minimum Deposit Amount Incentive Structure Time Limit to Use Commission/Cash Offer Deposit Details Link Deadline
Refer a friend to Questrade and when they open an account you receive $25 cash back and they receive either A) $25; B) $50; C) $75; D) $100; or E) $250 depending on the amount deposited amount. Enter code: 476104302388759 during account sign up to qualify. Be sure to read the terms and conditions for eligibility and additional bonus payment structure and minimum balance requirements. A) $1,000 B) $10,000 C) $25,000 D) $50,000 E) $100,000+ $25 cash back (for referrer per referral; $50 bonus cash back for every 3rd referral) For referred individuals: A) $25 cash back B) $50 cash back C) $75 cash back D) $100 cash back E) $250 cash back Cash deposited into Questrade billing account within 7 days after funding period ends (90 days) Refer a friend terms and conditions Code Number: 476104302388759 none
Scotia iTrade If you refer a friend/family member who is not already a Scotia iTRADE account holder to them, both you and your friend get a bonus of either cash or free trades. You have to use the referral form to pass along your info as well as your friend/family members’ contact info in order to qualify. There are lots of details/conditions to this deal so be sure to read the details link. A) $10,000 B) $50,000+ A) You(referrer): $50 or 10 free trades; Your “Friend”: $50 or 10 free trades (max total value:$99.90) B) You(referrer): $100 cash or 50 free trades; Your “Friend”: $100 cash or 50 free trades (max total value: $499.50) 60 days Refer A Friend to Scotia iTrade tbd
If you (an existing Qtrade Investor client) refer a new client to Qtrade Investor and they open an account with at least $1,000 the referrer and the referee may both be eligible to receive $25 cash. See terms and conditions for full details. $1,000 $25 cash back (for both referrer and referee) Cash deposited at the end of the month in which referee’s account funded Refer A Friend to Qtrade Investor none
BMO InvestorLine If you (an existing BMO InvestorLine client) refer a new client to BMO InvestorLine and they open an account with at least $5,000 the referrer and the referee may both be eligible to receive $50 cash. To qualify the referee must use the email of the referrer that is linked to their BMO InvestorLine account. See terms and conditions for full details. $5,000 You(referrer): $50; Your Friend(referee): $50 Payout occurs 45 days after minimum 90 day holding period (subject to conditions). BMO InvestorLine Refer-a-Friend January 5, 2021

Expired Offers

Last Updated: Apr. 30, 2020 16:44PT

Transfer Fee Promotions

Company Brief Description Maximum Transfer Fee Coverage Amount Minimum Deposit Amount for Transfer Fee Eligibility Details Link Deadline
Move your brokerage account to Questrade and they’ll cover the transfer-out fee up to $150. $150 n/a Transfer Fee Promo none
Transfer $15,000 or more to RBC Direct Investing and they will pay up to $200 in transfer fees. $200 $15,000 Transfer Fee Rebate Details none
Transfer $15,000 or more into a new HSBC InvestDirect account and you may be eligible to have up to $152.55 in transfer fees covered. $152.55 $15,000 Confirmed via email contact with HSBC InvestDirect Rep. Contact client service for more information. none
Transfer $15,000 or more to Qtrade Investor from another brokerage and Qtrade Investor may cover up to $150 in transfer fees. See terms and conditions for more details. $150 $15,000 Transfer Fee Rebate none
Transfer $20,000 or more to a National Bank Direct Brokerage account and they will pay up to $135 plus taxes in transfer fees. $135 $20,000 Transfer Fee Rebate none
Transfer at least $25,000 or more in new assets to TD Direct Investing when opening a new account and you may qualify to have transfer fees reimbursed up to $150. Be sure to contact TD Direct Investing for further details. $150 $25,000 Transfer Fee Promo Contact client service for more information (1-800-465-5463). none
Transfer $25,000 or more into a CIBC Investor’s Edge account and they will reimburse up to $135 in brokerage transfer fees. Clients must call customer service to request rebate after transfer made. $135 $25,000 Confirmed with reps. Contact client service for more information (1-800-567-3343). none
BMO InvestorLine Open a new qualifying account with BMO InvestorLine or fund a qualifying existing account and you may be eligible to have transfer fees covered up to $200. Contact client service for more details. $200 Contact client service for more information Contact client service for more information (1-888-776-6886) none

Expired Offers

Disnat Desjardins Online Brokerage is offering up to $150 to cover the cost of transfer fees from another institution. To be eligible, new/existing clients need to deposit $10,000 into a Desjardins Online Brokerage account. You’ll have to call 1-866-873-7103 and mention promo code DisnatTransfer. See details link for more info. $150 $10,000 Disnat 1% Commission Credit Promo January 8, 2020
Last Updated: Apr. 30, 2020 16:35PT

Other Promotions

Company Brief Description Minimum Deposit Amount Required Details Link Deadline
Submit your information via the Hardbacon website to be referred to National Bank Direct Brokerage. Open and fund a qualifying account and you may receive up to 20 commission-free trades and discounted trading commissions. Be sure to read full terms and conditions. n/a Hardbacon Free Trade Promo none
Disnat Desjardins Online Brokerage is offering $50 in commission credits for new Disnat Classic clients depositing at least $1,000. See terms and conditions for full details. $1,000 Broker@ge 18-30 Promotion none
Scotia iTrade Scotiabank StartRight customers can receive 10 commission-free trades when investing $1,000 or more in a new Scotia iTrade account. Trades are good for use for up to 1 year from the date the account is funded. Use promo code SRPE15 when applying (in English) or SRPF15 when applying in French. Be sure to read full terms and conditions for full details. $1,000 StartRight Free Trade offer none

Expired Offers

Last Updated: Apr. 30, 2020 16:39PT

Digital Advice + Roboadvisor Promotions

Robo-advisor / Digital advisor Offer Type Offer Description Min. Deposit Reward / Promotion Promo Code Expiry Date Link
Discounted Management Open and fund a new Questrade Portfolio IQ account with a deposit of at least $1,000 and the first month of management will be free. For more information on Portfolio IQ, click the product link. $1,000 1st month no management fees KDKFNBBC None Questrade Portfolio IQ Promo Offer
Cash Back Open and fund a new or existing SmartFolio account with at least $1,000 and you could receive 0.5% cash back up to $1000. Use promo code PROMO1000 when opening a new account. See terms and conditions for full details. This offer can be combined with the refer-a-friend promotion. $1,000 0.5% cash back to a maximum of $1000. PROMO1000 January 2, 2020 SmartFolio Cash Back Promo
Discounted Management Open a new account with BMO SmartFolio and receive one year of management of up to $15,000 free. See offer terms and conditions for more details. $1,000 1 year no management fees STSF April 30, 2019 SmartFolio New Account Promotion
Cash Back – Referral BMO SmartFolio clients will receive $50 cash back for every friend or family member who opens and funds a new SmartFolio account. Friends and family referred to SmartFolio will receive $50 cash back for opening and funding an account, plus automatic enrollment into SmartFolio’s mass offer in market at the time. See offer terms and conditions for more details. $1,000 $50 cash back (referrer) $50 cash back (referee) Unique link generated from SmartFolio required. None SmartFolio Website
Transfer Fee Coverage Transfer at least $25,000 into Virtual Wealth when opening a new account and you may be eligible to have up to $150 in transfer fees covered by Virtual Wealth. $25,000 up to $150 in transfer fees covered None None Contact customer service directly for more information.
Last Updated: Apr. 30, 2020 16:40PT

Offers for Young Investors

Brokerage Offer Type Eligible Age Range / Client Segment Offer Description Min. Deposit Expiry Date Link
Student Pricing Clients with CIBC Smart™ Account for students $5.95 per trade and zero annual account fees not required None CIBC Student Pricing
Broker@ge 18-30 18-30 years old investors Benefits: * 5 free transactions (Minimum deposit of $1,000 required) * No inactivity fees * No asset minimum to maintain for free registered accounts * Exclusive events * Disnat Mobile App $1,000 None Broker@ge 18-30
Offers for professionals & Students Students in selected fields of study Professionals and students in the below fields can benefit from a reduced pricing structure: * Engineering students * Legal, accounting and business students * Healthcare students * Health sciences students * Nursing students Benefits: * $5.95 commission on equities * $0 commission on ETFs * $0 annual administration fee not required None NBDB Student Pricing
Young investor pricing 18-30 years old investors Benefits: * $7.75 commissions for stock and ETF trades * No account minimums * No quarterly admin fees min. $50 a month through pre-authorized contributions. None Young Investor Pricing
Waiver of account maintenance fee Clients who have RBC Student account, currently or in the past 5 years. The Maintenance Fee ($25 per quarter) is waived, regardless of the account balance. not required None Zero Account Management Fee
Young Investors Offer Clients below 26 years old Low activity account administration fee and the RSP account administration fee are waived. not required None Young Investors Offer
Zero Account Administration Fee Clients below 26 years old The account administration fee ($24.95 per quarter) is waived. not required None $0 Account Administration Fee
Last Updated: Apr. 30, 2020 16:45PT