Tag: Interactive Brokers

Interactive Brokers

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Discount Brokerage Weekly Roundup – June 21, 2013

While storms were raging across stock markets this past week, it was definitely calmer waters in terms of discount brokerage news and chatter.  In this week’s roundup, we look at the actions that landed another Canadian discount broker in the IIROC penalty box, a report by TD on Canadian investors as well as a review of the chatter on stock forums about brokerages and some useful cautionary investing tales. Finally, we take a quick look at the results from the twelfth edition of  the U.S. Self-Directed Investor Satisfaction Survey results from J.D. Power released earlier this week.

Scotia Capital gets called for an offside

Over the past several weeks, it seems that that Investment Industry Regulatory Organization of Canada (IIROC) has been handing out a series of penalties to Canadian discount brokerages. Joining the likes of Questrade and Interactive Brokers, the decision against Scotia Capital Inc (the parent of Scotia iTrade) was based on activity between 2009 and 2011, shortly after it had acquired E*Trade in 2008.

Scotia Capital was hit with a $150,000 fine for failing to have policies and procedures in place that could detect potential wash trades and high closing prices.  To read more about the settlement, check out the IIROC press release or a great write-up about it in the Globe and Mail.

The Investor Survey Says…

TD Bank Group released results from a recently commissioned a survey of Canadian investors. The survey asked just over 1000 Canadian investors about their thoughts and perspectives on the investing climate in the next 12 months.  Of those surveyed, 41% felt that their personal portfolios would improve even in the face of mild Canadian and US economic recoveries and a poor global economic outlook.    This suggests that investors surveyed might be more interested in looking closer to home for investing ideas rather than looking abroad.

Another interesting finding from the survey is a classic illustration of behavioural finance in action.  Given the run up in the markets experienced for the first half of this year, the rising prices seemed to have also lifted the outlook of investors. Paradoxically, investors are constantly told or reminded that past performance doesn’t guarantee future results, yet it is interesting to see how the past does, in fact, shape investor perceptions.   As described in their press release, those investors surveyed who experienced a loss were more prone to being pessimistic about the future than those investors who experienced a gain.

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Discount Brokerage Weekly Roundup – June 14th 2013

This past week was a fairly quiet one for Canadian discount brokerages, so this roundup will focus on some of the interesting events that took place in the discount brokerage space more generally.

The most popular story in the discount brokerage space continues to be the supposed return of retail investors to equity markets.  Digging a little deeper into exchange activity, however, it seems investors don’t seem to be participating in all markets equally.

In last week’s roundup we reported the metrics from Questrade as well as Interactive Brokers that suggest trading activity is increasing.  Based on the recent performance of the US discount brokerages TD Ameritrade, Interactive Brokers, E-Trade and Charles Schwab, it seems that traders have been well aware of this trend already. According to a recent report by Bloomberg, these US discount brokerages have seen an increase of 38% since January 2013.

In the Canadian marketplace, the TMX group (which represents over 80% of trading activity in Canada) recently reported their trading statistics for May 2013.  The picture the trading volume numbers paint is definitely not as rosy as it is in the US.

For the Toronto Stock Exchange, the year-to-date number of transactions was 17.4% lower compared to the same point last year.  Even grimmer, however, is the number of transactions for the TSX Venture Exchange which saw a drop of almost 44% in transactions compared to the same time in 2012. Interestingly, the Montreal Exchange, where most of the Canadian options trading takes place, increased by almost 4% compared to this point last year.  This data point certainly suggests that the interest in options trading has remained much stronger among investors than participating in either the TSX or the TSX Venture listed equities.

Discount brokerages  seem to have their work cut out for them though if they wish to compete in this low trading activity environment. Interactive Brokers, in its presentation at the Global Exchange & Brokerage Conference in New York last week, disclosed how it is intending to achieve its ambitious goal of being a dominant global player in discount brokerage services.  In a nutshell, they aim to be a very low cost option for investors and as their numbers point out, it seems to be working. In terms of trading activity, customer accounts and profit growth, Interactive Brokers is posting some very interesting numbers relative to its peers.

One data point that is particularly relevant for active traders to pay attention to is the aggressive expansion Interactive Brokers has managed to achieve in margin lending.  From 2007 to 2013, Interactive Brokers has seen their market share for margin lending among discount brokerages increase from 5% to 30%. By offering ultra-low rates, especially on products that active traders access, it seems that Interactive Brokers is hitting the mark.

This past week, margin lending was also the focal point of the latest promotion being offered by National Bank Direct Brokerage. While only for a limited period of time, it is a unique offering compared to what other promotions are currently being run, and this deal will most likely be watched very carefully to see if it will be run again at some point.

While it is still too early to draw any conclusions, Canadian discount brokerages are likely to increase taking aim at users of margin trading and active traders as these are often higher value clients to bring on board.

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Discount Brokerage Weekly Roundup – June 7th 2013

This week’s discount brokerage update features the newly announced deal by BMO InvestorLine, a couple of great forum post on the Financial Webring Forum on Qtrade vs. RBC Direct Investing  as well as another article from The Globe and Mail about Canada’s best discount broker.

Deals Getting Some Air

Unlike a lot of deals that tend to start right at the beginning of the month, BMO InvestorLine has tended to announce their new deals a few days into the start of a new month.  In keeping with their routine, this past week they BMO InvestorLine announced their latest promotion where new account openings can choose between receiving 2000 Air Miles or $250 cash back. The minimum deposit to qualify for this offer is $100,000 so it is one of the higher priced promotions currently being offered by a discount brokerage. For more details on this and other deals for June 2013, click here.

Traders Coming Back?

It looks like investor activity is starting to climb in the US which is likely the result of major indices hitting new all-time highs last month.  Overall markets appear to be shrugging off bad news and rallying on good news.  Interactive Brokers reported their daily average revenue trades (DARTs) improved from this time last year (13%) as well a slight month over month improvement (6%).

Canadian discount broker Questrade also reported improved options trading activity since they introduced multi-leg options trading.  The following screenshot of the news release hints at trading activity with Questrade having picked up. To read Questrade’s full press release regarding options trading activity, click here.

Close is Good Enough

Looking through the Financial Webring forum, this post was spotted where the user (“Amira”) was trying to decide between Qtrade and RBC Direct Investing.

One of the most interesting answers came from the user “Ockham” who basically suggested not worrying too much about picking the best discount brokerage as they are all very similar to one another:

FWF_Qtrade_RBCDI_2013-06-07_1658

 Another “Best Discount Brokerage”

An article in the Globe and Mail (by Gail Bebee) was published earlier this week entitled “For the DIY investor, which discount broker is best?”   This article is another in the growing list of those identifying who they think is Canada’s best discount brokerage. Ultimately Gail Bebee narrowed her top three choices down to BMO InvestorLine, RBC Direct Investing and Qtrade with her top choice being BMO InvestorLine.

Whether the results from Rob Carrick’s annual discount brokerage review will concur could make for interesting times at the champion’s podium.

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Event Review – World MoneyShow Vancouver – April 2013

World MoneyShow VancouverThis year’s Vancouver World MoneyShow turned out to be a little different than most others. The exhibiting space felt a bit smaller than usual, the lineups took a bit longer and the schedule a bit less punctual.  As it turned out, this year’s MoneyShow would be the one in which this franchise would announce its Canadian retirement.

The big announcement the MoneyShow franchise would be exiting the Canadian market came as a surprise to many. With one more stop to go in Toronto this upcoming October, the MoneyShow organizers said they have enjoyed their time in Canada and will turn over their Canadian show back to the predecessor of the MoneyShow in Canada – the Financial Forum.  Charles Githler, Chairman and Co-Founder of the MoneyShow will be taking the reins for the Financial Forums next year and when we spoke to him at the show, he hinted that something bigger and brighter would be coming next year.

A small (26) and eclectic mix of companies, organizations and services exhibited this year ranging from multibillion dollar energy giant Royal Dutch Shell to consultants offering grant funding tips.  By far the most popular booth was the ‘crack the safe’ promotion held by MoneyShow which offered attendees the chance to punch in a code on a safe for a chance to win the $50,000 it contained.   There was also the usual assortment of promotional items and conference swag. Aside from some interesting pens and rubber ducks, nothing really stood out this year as being very cool conference loot.

Surprisingly, there were three discount brokerages in attendance and one notable absence. TD Direct Investing, National Bank Direct Brokerage and Interactive Brokers all attended the conference this year, however a regular at these conferences, Disnat, did not.  The discount brokerage’s booths varied in their ‘bells and whistles’ and giveaway items. TD Direct Investing’s booth was located in the prime real-estate – right at the entrance to the conference. They had their platforms on display as well as an army of staff to handle questions.  In contrast, Interactive Brokers took a no-frills approach with a lone rep, some brochures and a laptop. National Bank Direct Brokerage was offering their standard ‘hand sanitizer’ (a practical piece of conference gear after all that hand-shaking) as well as a special deal on trading commissions for new account sign ups (the details of which we’ll be posting in our deals section here).

One of the brighter spots of the conference was the assortment of interesting speakers discussing everything from market cycles and seasonality to exploration opportunities to personal finance and everything in between.

Bruce Sellery, personal finance author and owner of Moolala, gave an energetic and thought-provoking series of tips to help Canadians better approach their own financial management.  Other interesting speakers, such as Peter Hodson (of Canadian MoneySaver and 5i Research) gave investors some interesting food for thought about the mutual fund industry as well as important signs to look for when assessing investing opportunities. Most notable among those tips: “pull the weeds and water the flowers” when it comes to managing your portfolio’s winners and losers.  Marin Katsua of Casey Research also shared his dour forecast of the next few months in the mining and exploration space as well as his fascinating case for the energy market potential in Europe.

Overall, participants, speakers and exhibitors seemed to characterize Vancouver’s MoneyShow as a bit slower and smaller than usual. The MoneyShow’s formula of speakers, exhibitors and giveaways nonetheless provided something unique to attendees. Hopefully the Toronto show can be a chance for the Financial Forums to provide Canadian self-directed investors with a glimpse of greater things to come.

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Special Series: Review of Globe and Mail’s Discount Brokerage Rankings – Part II

In part one of this series, we looked at the background of the Globe and Mail discount brokerage rankings as well as how they’re structured and who they’re targeted towards. In this next part, we take a detailed look at what the discount brokerage rankings are actually measuring and some interesting observations we made about the Canadian discount brokerage industry over time.  Lastly, we provide some important tips to keep in mind when using rankings as part of your product research.

What Do the Discount Brokerage Rankings Measure?

When looking at any ranking or rating, one of the most important questions to be clear on is what the ranking or rating is actually measuring.  In our review of the J.D. Power Investor Satisfaction Survey, we saw that “investor satisfaction” was being measured by six components: interaction, trading charges and fees, account information, account offerings, information resources and problem resolution. By comparison, the Globe and Mail discount brokerage rankings are measuring what Rob Carrick thinks is the “best discount brokerage” for “mainstream” investors.

As we saw in part one, when looking across the last eleven rankings, it appears that the categories that go into defining “the best” discount brokerage are not static. The most stable characteristics of what it means to be “the best” seem to cluster around costs, trading and tools. According to Carrick, the categories that he chooses vary in large part because they are based on a combination of data from reader surveys and his perceptions of what mainstream investors are curious about or would find worthwhile.

Strengths of the Discount Brokerage Rankings

A strength of this approach is that the discount brokerage rankings are somewhat reflective of the mood or sentiment of mainstream Canadian investors.  If investors are curious about certain features, such as commission free ETFs or user experience of a discount brokerage, the rankings have incorporated these kinds of innovations into their structure.  Having looked at a decade of results, it is fair to say that the rankings reflect the pulse of what mainstream investors are exposed to from the discount brokerage industry and hence curious about.

Limitations of the Discount Brokerage Rankings

While Rob Carrick’s opinion is certainly informed by monitoring Canadian discount brokerages for over 14 years, his opinion may not necessarily be shared by other investors, something that readers should keep in mind when doing their research.  The degree to which his opinion can be generalized rests on how accurately the needs of “mainstream investors”, a term that is loosely defined, are captured in the questions he uses to survey discount brokerages and in the process he uses to evaluate their products and services.

A second limitation of the rankings is historical comparability.  Because the criteria have changed as often as they have, it is difficult to compare historical performance of Canadian discount brokerages in a meaningful way.  It may be possible to compare results on costs, trading and tools because of their relative stability as categories however the total scores from year to year are largely incomparable.

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Special Series: Review of Globe and Mail’s Discount Brokerage Rankings – Part I

Introduction

As part of our continued look at Canadian discount brokerage rankings, we review the longest running comparison and ranking of Canadian discount brokerages: The Globe and Mail’s annual ranking of online brokers, which had its start back in 1999. In part one of this series, we go through how we conducted the review, who the rankings are aimed at, the discount brokerages covered in the rankings and how the rankings are structured.

Our Methods

The scope of this review covers the 11 Globe and Mail discount brokerage rankings published from 2002 to 2012.  Even though the rankings started in 1999, we felt the window we used to be sufficient to explore the recent history of discount brokerages within Canada, and more importantly to illustrate the nature of how the rankings have changed over time.  The data was retrieved by searching for each years’ results via Google, The Globe and Mail website as well as from several websites that contained archived copies of articles. In addition to researching online, we also had the chance to speak to Rob Carrick of The Globe and Mail directly about his experiences in putting together the reviews.

Once gathered, the data was compiled into tables for sorting and analysis. Initially we thought it would be possible to compare scores and how they changed from year to year, however given that the ranking criteria changed so frequently, such a comparison would offer limited value.  Instead, we have included a figure (see next page) that details the criteria for each year and how the criteria have changed over time.  Although it is also of limited reliability, we nonetheless took the historical average rank of each discount brokerage currently referenced in the 2012 rankings which can be seen in the table to be included in part two of this series.

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Discount Brokerage Weekly Roundup – Dec. 7th 2012

Interactive Brokers made the news this week as it released its trading metrics for the month of November.  While not a perfect proxy for the rest of the investment market, Interactive Brokers’ transaction volumes, known as Daily Average Revenue Trades (DARTs) help to provide an indirect measure of the ‘health’ of the stock market participants including discount brokerages.  November’s data from Interactive Brokers show a substantial month over month increase (14%)in DARTs from October to November.   Even more interesting is the rise in trading volumes since the lows in August.  DARTs are now up over 23% from the August lows signaling an increased level of participation in the financial markets.   DARTs cover several types of trading including futures contracts, options contracts and trading in shares. Another metric that seems to validate that observation is the increasing number of new account openings.  As this is the picture for US investors, this data could be a signal that investors are jumping into the market ahead of the fiscal cliff or are they tactically preparing themselves to be able to respond.   A recent report by Investor Economics has mentioned that Canadian investors have sat on the sidelines for quite some time presenting some challenges to the Canadian discount brokerage industry for commission revenues.

A Canadian discount broker that we do not hear about very much, CIBC Investor’s Edge, is getting a makeover.  The new interface is appears to be an improvement from its prior layout, with some clearer and more intuitive sections.  For a peek at the site and its new features, click here.

Event Horizon

As we round out the year, webinars and seminars are giving way to Christmas/holiday cheer and holiday parties.  The next event of interest is the seminar, hosted by Disnat and presented by iShares on using ETFs in an equity portfolio on December 19th.  For more details, click here.

Best Discount Brokerage Tweet of the Week

It was slim pickings from the discount brokerages this past week in tweets.  One interesting tweet that linked to a great moneyville article on ETFs came from Scotia iTrade.  To read the tweet and article, click here.

The People Have Spoken

This  week, a discussion focused on the two discount brokerages that offer very low commission charges on trading, Interactive Brokers and Virtual Brokers.  Read what users had to say in the RedFlagDeals  investment forum about Interactive Brokers vs Virtual Brokers.

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Discount Brokerage Weekly Roundup – Oct. 20th 2012

Discount Brokerage Weekly Roundup

From the Canadian discount brokerages, this past week saw the launch of a new contest by Questrade  called “Ring the bell with Questrade”.  Winners of the contest will get to ring the opening bell at the NASDAQ MarketSite and round trip airfare to New York City, three nights’ accommodation and $500 in spending money. For contest details you can click here.   TD Waterhouse Discount Brokerage officially announced the Thinkorswim Canada platform (which readers of Sparxtrading.com already heard about a few days earlier here).  Some feature upgrades to the services at BMO Investorline earlier this month include the Recognia-based Technical InsightTM Tool being deployed (you can read the news release here).  Recognia’s tools are a popular offering amongst many Canadian discount brokerages and provide technical analysis tools and screening for major stock indices in Canada and the US.

For the US discount brokers, several discount brokerages reported their quarterly earnings.  While Schwab reported a third quarter profit increase of 12 percent, the interesting stats were the drop in revenue trades (down 19% year over year) and a huge 61% drop in new brokerage accounts opened compared to last year. Full details on the Schwab release can be found here. Etrade also reported their earnings which came in lower than expected, and also saw a 61% drop in new accounts vs last quarter.  Interactive Brokers also reported a decrease in their earnings year over year and while new accounts grew 11% year over year, they too seem be suffering from decreased trading volumes (19% lower year over year).  TD Ameritrade reports later this month. For a quick overview of the US discount brokerage stocks, check out this Forbes article here.

On the hiring front, social media folks take note. There appears to be some opportunities to work for a couple of Canadian discount brokerages if you’re so inclined.

Best Canadian Discount Brokerage Tweet of the Week

This week’s best tweet comes from @nationalbank (on behalf of National Bank discount brokerage) via their content partners at @DesautelsMcGill.  The article, entitled ‘knowledge investing: the path to safer returns – part 1’ takes a look through the lens of value investing and the role that knowledge can play in selecting potential investments. You can access @nationalbank’s tweet here.

Event Horizon

This Saturday October 27th TD Waterhouse will be putting on its Direct Investing Expo in Vancouver. There will be a number of speakers including Bob Gorman, Chief Portfolio Strategist for TD Waterhouse.  For details click here.

The People Have Spoken

The following thread on Canadian money forum discussing the launch of ThinkorSwim Canada saw some good tips on the platform and eligibility along with the usual digs/cheers for favourite platforms.

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Discount Brokerage Weekly Roundup – Oct. 5th 2012

Discount Brokerage Weekly Roundup:

As we roll into October, the Canadian discount brokerage industry continues to show signs of competitive evolution.   First, the huge news released earlier this week that Questrade will transition into clearing its own trades via an in-house clearing division (currently pending regulatory approval).  By replacing their current clearing agent (Penson Financial Services Canada), Questrade believes they will be able to offer more timely settlement and record-keeping services to its clients – something that they had struggled with earlier this year around tax season.  While potentially helping to smooth things out on one side of their business, another reason why this move could prove to be important competitively for Questrade is that they will no longer be paying a clearing agent to deal with clearing and settlement. So what could they do with those extra dollars per trade they’ve been paying to their clearing agent? Depending on how much it costs Questrade to clear and settle their own trades (staff, technology, compliance etc), they might be in a position to lower their already low commission fees (i.e. pass along the savings instead of charging inactivity fees). This is a model that has proven to work well for Interactive Brokers. Alternatively, they might redeploy the extra cash into strengthening other aspects of their business as the competition amongst Canadian discount brokerages continues to heat up. Either way, this should be an interesting turn of events to watch unfold.

The second big piece of Canadian discount brokerage news is from Jitneytrade. In addition to announcing a move into their new offices (coincidentally Jitneytrade and Penson Financial Services Canada are located in the same building), Jitneytrade also announced their move into currency exchange .  The new foreign-exchange component is a service  aimed at institutional clients, and is another bold move for Jitneytrade into the institutional arena.

Best Canadian Discount Brokerage Tweet of the Week:

This week’s favourite tweet comes from @Scotia_iTrade:What’s the #KISS Principle? Watch The Market Guys and avoid some of the most common investing/trading mistakes [vid], http://ow.ly/8h4dt  – great video!

Event Horizon:

The Small Cap Conference is rolling into Calgary next week (October 9th)  and should offer investors interested in some small cap companies the chance to mingle with management, get some market analysis and maybe win a cool door prize.  For more details click here.

The People Have Spoken:

When it comes to taking a shot or passing up the stock market, the Great One Wayne Gretzky would rather pass.  This prudent strategy seems to have served him well in real life however it is an interesting position for brand ambassador to TD Waterhouse to play.  In any case, there were quite a few interesting responses to Wayne Gretzky’s personal finance tips from his interview earlier in the week.

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Following the “invisible hand” of the market

As a follow up to the article on the “vanishing trader”, we decided to look at the “invisible hand” of the market.  We took a brief look at the recent trading volume data (you can access this data here) published by one of the largest discount brokerage firms in the US, Interactive Brokers (ticker symbol IBKR).  While the available data only goes back to 2008, it is interesting to see the trend in volume of shares traded from 2008 through March of 2011 follow the trajectory of the markets upward.  Somewhere in early 2011 however, the volume of shares flowing through  IBKR pulled back significantly and continued to decline overall to present levels (about 4.5 million shares/month as of August 2012).

Even though we cannot know for sure why this slow and steady drop off has occurred, the data shows the S&P 500 going in one direction while trading volumes go in another. One theory is that the doom and gloom in the headlines over Europe and the stability of the European Union, the Arab Spring movements in the Middle East and the lackluster economic news  coming out of the US have finally taken their toll on the retail trader (who happen to make up a large portion of IBKR’s customers).  Both TD Ameritrade (ticker symbol AMTD) and Schwab (ticker symbol SCHW) have also felt a similar absence in trading volumes, indicating that IBKR is not alone.

One burning question remains, if the retail investor isn’t behind the recent rally then who is?

Invisible Hand - Interactive Brokers Shares Traded 2012 YTD