Tag: Virtual Brokers

Virtual Brokers

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Discount Brokerage Weekly Roundup – September 27, 2013

As hard as it is to believe, September is almost over and with it there was some major news this past week in the discount brokerage space.  In this edition of the roundup, I look at the big news in discount brokerage rankings that was announced earlier in the week as well as highlight what month end means for some deals.  Also included in the roundup are some interesting events spotted taking place at a major brokerage and some informative posts in the investor forums.

Another Best Online Discount Brokerage Announced

Earlier this week JD Power & Associates released the results from their annual investor satisfaction survey and the discount brokerage rankings that go with them.  This year’s winner was National Bank Direct Brokerage who narrowly edged out the reigning winner Disnat.   Some highlights from this year’s investor satisfaction survey were that the overall average satisfaction for the Canadian discount brokerage industry rose to 724 (out of 1000) up from 700 a year earlier.  While the rankings did cover most of the Canadian discount brokerages, there were a couple of popular brokerages (Virtual Brokers, Credential Direct and Interactive Brokers) that just didn’t have enough of a sample to be included.

To learn more about how the JD Power & Associates discount brokerage rankings work, check out the special series explaining this award.   Also coming up shortly is an in-depth look at the award results for 2013 as well as commentary from National Bank Direct Brokerage on the win.

So You Think You Can Trade?

National Bank Direct Brokerage has also been busy on the contest front.  In partnership with Horizons Exchange Traded Funds, National Bank Direct Brokerage is sponsoring the Horizons ETFs Biggest Winner Contest.  The simulated ETF trading competition awards cash prizes to those whose ETF portfolios outperform other competitors.   The contest has a grand prize of $7500, second prize of $2500.00 and weekly prizes of $500.   The competition starts on October 7th, 2013 and runs until November 15th. For more information about the competition check this link.

Guess Who’s Back?

Earlier this week, one of the major bank-owned discount brokerages, RBC Direct Investing, revived their investor education seminar series by holding some introductory sessions at their investor centers in Vancouver and Toronto. This article goes over what the event was like and what attendees can expect if they wish to attend.

What’s the Deal?

As we near the end of the month there a couple of discount brokerage deals are set to expire.  Scotia iTrade’s “Refer-a-Friend” offer is scheduled to expire at the end of September however on several occasions in the past this has been extended at the beginning of the next month.

Another notable deal expiring at the end of September is BMO InvestorLine’s Air Miles/$250 cash back offer. With the recent launch of deals by RBC Direct Investing, HSBC InvestDirect and the extensions of deals by a number of other brokerages earlier in the month, it will be interesting to see what BMO InvestorLine decides to roll out through next week as this is their major promotional offer currently being advertised. Although it was originally set to expire in early September, the expiry date for the “AirMiles/Cash Back” deal got pushed out until the end of the month so it will be interesting to spot what, if any deals will be announced.

Unhappy (Divid)Ending

In the RedFlagDeals forums this past week there was an interesting post spotted that discussed how dividends are treated while trading on margin.  Specifically, the answer to the following post by user Mark77 indicates that rules about where a dividend originates can determine how they get classified.

RedFlagDeals Investing Forum Post - Margin Trading and Dividends

 

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Discount Brokerage Weekly Roundup – September 13, 2013

Welcome to the Friday the 13th edition of the discount broker weekly roundup.  It’s been an exciting week in the markets as news of the widely anticipated Twitter IPO became official.  This week, I’ll provide some highlights of fee drops and deal announcements that took place, followed up by a couple of interesting forum on discount broker costs.  Finally, there are a couple of examples of how “social media” is being used by discount brokerages/financial firms to connect with Canadians interested in investing.

Fee Information Gets No RESP(ect)

Earlier this week, I wrote a piece on CIBC Investor’s Edge and how they’ve waived the annual fee for the RESP for balances under $15,000.  As a quick heads up, neither the fee schedule nor the commission page have been updated as yet, however the announcement does appear on their home page.

Deal Updates

RBC Direct Investing also just recently jumped onto the deals and promotions bandwagon by offering 25 commission-free trades that can be used for up to a year.  Their marketing strategy of being able “trade free for a year” is definitely catchy however be sure to read the fine print.  To see how this offer stacks up against other discount brokerage deals, click here.

In the Forums

Forum activity has been picking up recently, with investors looking to other investors for their thoughts on market direction and particular stocks.  Along with the increase in market interest, there were a couple of discount brokerage related questions that came up about the costs at Questrade.

In this first post on Canadian Money Forum, a mini-debate was touched off by Questrade’s recent announcement to its clients that it would be raising its options assignment/exercise fee to $24.95 (flat) from $12.95.

Forum Post on Questrade Option Assignment Fee

The following post on RedFlagDeals.com, there was some clarification required on the actual interest rates for margin accounts.  While the original poster had their answer clarified, the follow up post shed light that Questrade’s margin interest rates are not, in fact, as cheap as other discount brokerages.  This is a good example of why it is important to understand all of the costs associated with choosing a discount brokerage and whether some tradeoffs on price make sense for the style of trading that is anticipated.

Investors and Social Media

A recent survey commissioned by BMO InvestorLine showed that investors may not find social media as reliable as “traditional media” when it comes to investing information.  Intriguing as the results were, there are more results daily of the shift in media towards the new channels, such as Twitter, Facebook and others.  The following examples from this week’s roundup seem to suggest that social media is something investors and Canadian discount brokerages, are starting to embrace more fully.

From FaceBook

While it might be hard to imagine Facebook being a source of investment information, the following example of funny video from TD shows how TD is leveraging Facebook as a way to connect with investors in their “TD Helps” forum

From Twitter

Twitter is awash in content being provided by various discount brokerages. While there is often an incentive to try and direct traffic to the brand, online brokers such as National Bank Direct Brokerage, have used Twitter to connect visitors to educational content. And they’re not alone, brokerages on Twitter such as Scotia iTrade and Virtual Brokers are also doing the same, albeit to different degrees.

 

As these major brands migrate more of their content onto social media channels, users may find it ‘easier’ to trust the channel if they begin to trust the personalities present on them.

That’s it for this edition of the roundup, hope everyone has a spectacular weekend!

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National Bank Direct Brokerage Extends Commission-Free ETF Trading Offer

National Bank Direct Brokerage announced yesterday that their offer for commission-free ETF trading has been extended out until the end of October of 2013.  The commission-free ETF offer was first mentioned back in April where it was explained in detail.

Some strings attached

To recap, there are a few conditions attached to this offer (full conditions are available here), investors need to pay attention to. For example, the deal requires a minimum purchase amount ($5,000 per trade) and the trade hold time needs to be at least one day.  In addition, the commission-free ETF deal applies only to Canadian ETFs and clients who are eligible for this offer can trade these ETFs commission-free for three months from the point of enrollment.

It is important to note that commissions will be charged at the time of trading an ETF and eligible trades will have the commissions refunded at a later date. For those considering the deal, pay close attention to the reimbursement schedule as repayment dates can be as late as March 2014.

With the extension of this deal out to October, National Bank Direct Brokerage joins Qtrade, Questrade, Scotia iTrade and Virtual Brokers in offering commission-free ETF trading offers. To learn more about commission free ETF trading, check out the following link for the special series on commission-free ETFs.

Company Number of Commission Free ETFs Minimum Trade Amount Hold Period (minimum) Details Link
All Canadian ETFs (>250) $5000 1 business day National Bank Direct Brokerage Commission-Free ETF Plan
60 $1000 1 business day Qtrade Commission-Free ETF Plan
All ETFs* (only buys are commission-free) $0 None Questrade Commission-Free ETF Plan
50 $0 1 business day Scotia iTrade Commission-Free ETF Plan
All ETFs* (only buys are commission-free) $0 None Virtual Brokers Commission-Free ETF Plan

More than just commission-free ETF trading…

The announcement for the extension of the commission-free ETF deal also contained two other interesting tidbits.

National Bank Direct Brokerage reported that their client transaction activity increased  9% between February to July of 2013 when compared to the same time in 2012.  This is significant for two reasons. The first is that no other Canadian discount broker really reports their transaction activity so it is interesting to note National Bank’s choice to do so.  Second, the reported increase provides some level of confirmation to the data points that show investor activity returning to stock markets.

Another interesting hint dropped in the news release is that National Bank Direct Brokerage will be officially launching its new website in September.  Along with other discount brokers, National Bank Direct Brokerage has been upgrading parts of their website this past summer including a facelift to their education section.  The “soft launch” for the new website was the end of July. The latest improvements show that National Bank Direct Brokerage has been ramping up its use of video, social media and user experience principles to create a much more modern web experience for self-directed investors than some of their competitors.

*Editor’s Note: The original post mentioned that a new website would be launched by National Bank Direct Brokerage in September when, in fact, the official launch of the website rolled out at the end of July will take place in September. There will be no additional upgrades/features added to the website for the official launch.

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Discount Brokerage Weekly Roundup – August 9, 2013

This week’s discount brokerage roundup will be short and sweet as we continue to cruise through August. In this roundup, a major US discount brokerage comes under fire for how it handled client orders, the mobile trading landscape gets a little clearer for some investors and a little bumpier for others and lastly the marketing machinery looks to be heating up ahead of September with discount brokerages getting creative.

Going with the flow?

One the major discount brokerages in the US, E*trade Financial, caught a bit of flak from investors as it quietly announced that it was under investigation from the Financial Industry Regulatory Authority (FINRA) for how E*Trade has been routing customer orders.  For some good context and explanation, check out this article form Businessweek.

Mobile Trading Reviews Get Rolling

This past week saw the launch of the profiles on mobile trading platforms offered by Canadian discount brokerages. The two discount brokerages covered this week were Disnat (with the Disnat Classic platform) and National Bank Direct Brokerage.  Click the following link to follow the series on mobile trading at discount brokerages.

Coincidentally, RBC’s latest mobile app was launched earlier this week however it looks as though some Blackberry users have had a few hiccups in working with the new app. Reactions across Twitter were mixed but it looks like iPhone users are pleased with the new version.

“Ad”ing some creativity

The discount brokerage marketing machinery looks like its revving itself up.  This cheeky advertisement from Interactive Brokers recently launched and is a bit of a departure from their cartoony ads from years past:

In addition to commercials, several Canadian discount brokerages are pitching in as sponsors for Options Education Days presented by the Montreal Exchange.  Spotted on the list of event sponsors in Montreal & Toronto are:

  • CIBC Investor’s Edge
  • Disnat
  • Interactive Brokers
  • National Bank Direct Brokerage
  • TD Direct Investing
  • Virtual Brokers

To learn more about their options pricing plans, check out the options pricing comparison section.

That’s it for this week, hope everyone has a wonderful and safe weekend!

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Commission-Free ETF Trading at Canadian Discount Brokerages: A Clever Lure or a Good Deal for Investors? Part 4

In the final part of our series on commission-free ETF trading at Canadian discount brokerages, we look at the offers from Virtual Brokers and Questrade and conclude the series with some lessons learned from researching commission-free ETF offers.  If you missed the earlier parts of the series, click here for part 1, here for part 2 or here for part 3.

Commission-Free ETFs at Virtual Brokers

While Virtual Brokers started offering commission-free ETF trading on a limited set of ETFs, in 2012 they rolled out commission-free ETF purchases on all ETFs.  Because they have two “commission-free” ETF offers going concurrently, a great deal of confusion appears to have been caused with investors.  As such, it bears repeating that at Virtual Brokers, all ETFs can be purchased commission-free but only a certain set of ETFs can be purchased and sold commission-free.

Screenshot of Virtual Brokers' Commission-Free ETF page
Wording of Virtual Brokers’ commission-free ETF offers (circled in orange) is a bit confusing.

Committing to a list of 100 ETF funds by 17 different fund providers is a bold undertaking within the ETF space.  Because funds change according to market forces, staying on top of which funds are still functional proved to be a challenge for Virtual Brokers.

An interesting discovery that was made when looking into the list of 100 ETFs advertised by Virtual Brokers was that their list contained a mixture of duplicate names, miscategorized ETFs and ETFs that had been discontinued.  For example, the XID (iShares S&P CNX Nifty India Index Fund) appeared twice in the list (see below); CEW is the ticker symbol for both the WisdomTree Dreyfus Emerging Currency Fund and the Claymore (now iShares) Equal Weight Banc & Lifeco ETF however both were listed as being on the Canadian market (the WisdomTree ETF is listed on the NYSE); four ETFs were identified in the advertised list that had been discontinued for months: DENT, HAG, HIF and XRO; and lastly, many of the ETFs branded as Claymore had yet to be renamed to their new iShares titles.

Commission-Free ETF list duplicate entry

To Virtual Brokers’ credit, when these issues were pointed out to them, a senior representative confirmed that they would be corrected and after several emails, the list was updated and corrected within 24 hours.  The new list has addressed the issues identified above with Virtual Brokers committing to keep their list of commission-free ETFs at 100.  ETFs that have been added to replace the discontinued group include First Asset Canadian Convertible Bond ETF  (CXF), Horizons Alphapro Balanced (HAA), First Asset DEX Government Bond Barbell Index ETF (GXF), First Asset DEX Corporate Bond Barbell Index ETF and the SPDR Barclays Short Term Treasury ETF (SST).

The fact Virtual Brokers faced a challenge keeping up with their own offers should serve as a lesson to investors. The ETF landscape is highly dynamic and the more specialized ETFs or those that might be more ‘exotic’ are also more prone to being discontinued from lack of investor interest.  It would be wise to double check the availability of an ETF on the commission-free list ahead of placing any trades.

Break down of commission-free ETFs at Virtual Brokers

Despite the number of ETFs offered commission-free, the majority of funds (>60%) are equity-focused.  Unlike the other two discount brokerages’ ETF selections, however, Virtual Brokers’ pool contains a couple of leveraged & inverse-leveraged ETFs which more active traders might find more appealing.  Of the three discount brokerages offering commission-free ETFs, Virtual Brokers is also the only one that includes several BMO ETFs.  While Virtual Brokers has a more diverse offering of ETF providers (17 providers), over 75% of the commission-free ETF pool comes from only three of those providers.

The fine print on the Virtual Brokers commission-free ETF offer is reasonably straight forward.  Two key points to keep in mind for this offer are that in order to be eligible for commission-free ETF trading:

  1. ETFs must be held for at least one business day
  2. ETF trades must be placed via the WebTrader platform

There is no minimum purchase amount required so this is positive news for individuals with more modest portfolios.  Also a positive feature, no commissions are charged at the time of purchase (and where applicable at the time of sale).  In certain instances, other discount brokerages will deduct a commission fee at the time of the trade then issue a refund for the commission usually within a few days of the transaction.

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Commission-Free ETF Trading at Canadian Discount Brokerages: A Clever Lure or a Good Deal for Investors? Part 3

In the first two parts of this series we touched on the different types of commission-free ETF trading being offered by discount brokerages and provided several tips for investors to keep in mind when considering these types of offers. (Click here to read part one or here to read part two)

In part three of this series, we compare the three providers currently offering commission-free buying and selling of ETFs (Qtrade, Scotia iTrade and Virtual Brokers) and look in detail at the offers from Qtrade and Scotia iTrade.

In the next part of this series, we will look at the offers from Virtual Brokers and Questrade in detail as well as the lessons learned from researching commission-free ETF offers at discount brokerages.

Comparing Commission-Free ETF Trading OffersCommission-Free ETF Overview

Even though Qtrade, Scotia iTrade and Virtual Brokers have limits on which ETFs are eligible to be bought and sold commission-free, the pool of ETFs offered by each brokerage is still sizeable with 60, 50 and 100 ETFs being offered respectively.

Between these three discount brokerages, there are 132 unique ETFs being offered by 17 different ETF providers. Interestingly, all three discount brokerages offer 30 of the same ETFs commission-free. For investors this means that a discount brokerage’s fee structure may be more of a factor to consider than which ETFs they offer.

Despite there being 17 different ETF providers, most of the funds come from only a handful of companies. In fact, four ETF providers contribute 78% of the commission-free ETFs available at Canadian discount brokerages with BlackRock alone offering slightly less than 50% of all the commission-free ETFs.  Horizons, BMO and Vanguard respectively make up the rest of the top four commission-free ETF providers.

We’ll now take a look at the offers from Qtrade and Scotia iTrade in detail. In the next part of this series we’ll look at Virtual Brokers’ offers in detail as well as Questrade’s offer and conclude with important lessons learned from researching commission-free ETFs.

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Discount Brokerage Weekly Roundup – July 5, 2013

Even though we roll into July on a short trading week, the discount brokerage space managed to toss along several newsworthy items. In this week’s roundup, we look at the US discount brokerages pointing to signs of improved investor enthusiasm, some fine tuning of ETF offers at Canadian discount brokerages, and some extra summertime heat in the form of spirited debates on the forums.

Trading Improving at US Discount Brokerages

Interactive Brokers’ latest trading data came on the same week that discount brokerages Schwab, E*Trade, and TD Ameritrade hit new 52-week highs.  Trading data from Interactive Brokers showed an increase of 27% over trading volumes at this point last year and an increase of Daily Average Revenue Trades (DARTs) of 4% over May. The recent patch of market volatility likely gave a bit of a boost to trading numbers, however looking at the 12% y/y growth in customer accounts it seems that more data points to investors, at least in the US stepping back into the markets.

Refresh on Commission-Free ETFs

As part of an upcoming piece looking at commission-free ETF trading at Canadian discount brokerages, we took a deep dive into the actual offerings from Qtrade, Scotia iTrade and Virtual Brokers.  While looking at the 100 ETF long list on the Virtual Brokers website, a number of discrepancies were spotted included four ETFs listed that were no longer trading and one ETF that had been duplicated.  A few emails back and forth and Virtual Brokers refreshed their list making the following changes.

Gone from the list are:

  • DENT
  • HAG
  • HIF
  • XRO
  • XID (the duplicated one)

They’ve been replaced by:

  • First Asset Canadian Convertible Bond ETF  (CXF)
  • Horizons Alphapro Balanced ETF (HAA)
  • First Asset DEX Government Bond Barbell Index ETF (GXF)
  • First Asset DEX Corporate Bond Barbell Index ETF (KXF)
  • SPDR Barclays Short Term Treasury ETF (SST)

More Heat Coming Towards Questrade

One of the most interesting and popular threads to follow on RedFlagDeals is the “Stay Away From Questrade.” Be warned, however, this is not a place for the faint of heart. There is lots of CAPS LOCK screaming and it is generally the place where many come to vent their frustrations about their experience with Questrade or simply stir the pot about trading with a low-cost brokerage. Again, it’s not for the faint of heart, but one particular post this past week about a user’s experience with shorting a stock serves as an interesting reminder to those who short stocks generally.

Questrade Short Selling Rant

The lesson: a discount brokerage can recall a stock at any point for any reason.  How a discount broker goes about doing this is variable – some brokerages ask nicely, others less nicely.  To wade into the thorny forest that is this thread click here.

Cooler Heads Tackle a Potential DRIP-off

For those curious about Dividend Re-Investment Plans (DRIPs), there was a great exchange (pun intended)  in the Canadian Money Forum that highlighted exactly how detailed converting dividends from a US stock can get.  At issue: the time of day at which foreign exchange rates get used to calculate conversions of foreign currency dividends.  While it may be for the real dividend enthusiast, it is still an informative example of a) a more structured forum conversation that the forum mentioned above and b) how much homework DIY investors really do to find an answer. To read more click here.

That’s it for this week’s roundup. On the horizon for next week will be part 3 of the series on commission-free ETF trading as well as a review of a neat research tool for junior mining stocks.

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Discount Brokerage Weekly Roundup – June 28, 2013

It has been predictably quiet in the discount brokerage space this past week with many self-directed investors out enjoying summertime activities. Still, there are some updates on several discount brokerage promotions that are noteworthy as we head into July.  Also, there are a couple of advertising/marketing stories that might be of interest for those keeping a closer eye on the industry.

Easy Come, Easy Go

The end of June is here and with it several discount brokerages are retiring some promotions. First, the Disnat SCATE promotion will end as of June 30th.  Also slated to expire at the end of June will be the 100 free trades offer from Scotia iTrade.  For details on the discount brokerage deals, check out our deals page here.

Not all the deals and promotions originally supposed to expire at the end of June will come to an end though. It seems that Scotia iTrade and Questrade have had a change of heart about a couple of their respective promotions. Scotia iTrade’s “Refer-a-Friend” offer has been extended to July 31st 2013 and Questrade also has extended its Advantage offer out to the end of August 2013.

Baby Not on Board

Even though it is not a Canadian discount brokerage, the news that the agency famous for bringing us the E*Trade baby is moving along signals a change in the times.  Discount brokerages in the US spend hundreds of millions of dollars in advertising per year and it appears that E*Trade is making a move to lower these advertising costs.  To read more about the story, click here.

Winning the Customer Service Game

Advertising also seems like it is on the mind of HSBC InvestDirect after their recent win of the Dalbar Direct Brokerage Service Award. We got what looks like a sneak peek at a promotional video that highlights what it took for the HSBC InvestDirect team to win this year.

Discount Brokerage Fees Still Matter

Last Friday’s article in the Globe and Mail ‘A primer on low-commission’ trading by Rob Carrick provided a quick overview of many discount brokerages’ fees.  Both Virtual Brokers and Questrade stand out as low-fee choices however as we pointed out in the special series comparing these two discount brokerages to each other, the low-commission price may mask other fees, such as data or platform fees, that are required in order to fully take advantage of the low commission rates.  An individual (named “Uss”) in the comments section of the article also made an interesting observation that Interactive Brokers wasn’t part of this low-commission rate primer although their rates are just as competitive at the lowest end of equity and option commission pricing currently available. Interactive Brokers has typically not been included in the annual online broker ratings that Rob Carrick publishes because they do not offer registered accounts and it would be safe to assume that is why they were not included in this primer either.

As a reminder for next week, Canadian stock exchanges will be closed on Monday July 1st for Canada Day and U.S Markets will close early (1PM) on July 3rd and will be closed all day July 4th.

Hope you all have a safe and enjoyable Canada Day and long weekend!

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Commission-Free ETFs at Canadian Discount Brokerages: A Clever Lure or a Good Deal for Investors? Part 2

In part one of this series, we looked at which Canadian discount brokerages are currently offering commission-free ETFs as well as why commission-free ETF trading has started to become so popular. In part 2 of this series, we take a closer look at the types of commission-free offers available and provide some tips for investors who might be considering commission-free ETFs as part of their discount brokerage comparison research.

There’s commission-free and then there’s commission-free

While the term “commission-free ETF” does suggest a no cost transaction, in reality there are a couple of different interpretations as to what “commission-free” actually means.

Company Number of Commission Free ETFs Minimum Trade Amount Hold Period (minimum) Details Link
All Canadian ETFs (>250) $5000 1 business day National Bank Direct Brokerage Commission-Free ETF Plan
60 $1000 1 business day Qtrade Commission-Free ETF Plan
All ETFs* (only buys are commission-free) $0 None Questrade Commission-Free ETF Plan
50 $0 1 business day Scotia iTrade Commission-Free ETF Plan
All ETFs* (only buys are commission-free) $0 None Virtual Brokers Commission-Free ETF Plan

As the table above shows, there are several ETF commission models being offered by Canadian discount brokerages.

First, there are those discount brokerages that offer a limited selection of ETFs that can be traded commission free – as in commission-free to buy and commission-free to sell.  The brokerages that offer this type of pricing are:

  • Scotia iTrade (which offers 50 ETFs commission-free)
  • Qtrade (which offers 60 ETFs commission-free)

Thus the trade-off is that there might be true ‘commission-free’ ETF free trading but only on a handful of ETFs. There are also minimum amounts of time (often at least 1 business day) that an investor needs to hold the ETF in order to qualify for commission-free status.

Another variation on ‘commission-free’ ETFs are from discount brokerages that allow purchases of any ETF commission-free but will charge the normal commission charge on the sale of the ETF.  Thus, only the purchase of the ETF is commission-free. The discount brokerages currently offering these types of commission-free ETF purchases are:

The offer from National Bank Direct Brokerage is slightly different in that it allows for unlimited commission-free ETF buying and selling but only of Canadian ETFs and only for a limited amount of time.   Although commission-free ETF trading at National Bank Direct Brokerage is currently part of a promotional offer, depending on the response they receive from prospective clients, their promotion could turn into a standing offer in the future.

Whatever the model being used, it is clear that with any ETF commission deal from the Canadian discount brokerages, there are certain strings attached. For self-directed investors, it is important to understand the terms and conditions attached to the ETF commission pricing and be vigilant about the strings that come attached to these offers.

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Commission-Free ETFs at Canadian Discount Brokerages: A Clever Lure or a Good Deal for Investors? Part 1

Every day increasing numbers of self-directed investors are either turning to exchange traded funds (ETFs) to meet their investing goals or are learning more about how ETFs could help lower their investing costs.   Given the interest in these products by self-directed investors and the commission costs that are associated with buying and selling ETFs, Canadian discount brokerages have not only taken notice but have also sought to leverage this interest to their benefit.

In the first of this three-part series, we briefly review the landscape of commission-free ETF trading in Canada. In part two we’ll look at what types of “commission-free” ETF trading options investors have as well as provide investors with several tips to keep in mind when considering these types of ETFs with a discount broker.  Lastly we’ll be taking a look at each discount brokerage’s commission-free ETF offering in detail to see what the pros and cons are of each.

It’s so Hard Being Popular

The case for investors embracing ETFs is relatively simple to make. Essentially, with ETFs investors get most of the benefits of a mutual fund (the two primary ones being professional management and diversity in composition) but at a fraction of the management cost.  Beyond the diversity and low management costs of ETFs, one of the biggest attractions for many investors has been the fact that ETFs, unlike their mutual fund counterparts, trade on stock exchanges the same way ‘normal’ stocks do.

The freedom to buy or sell them short, to take options on ETFs and to enter and exit with relative ease has meant that investors of all kinds have a very versatile tool in their wealth creation toolbox to work with.

Ironically, it is the popularity of ETFs that might be their undoing.  Data from the Canadian ETF Association (CETFA) shows that ETF landscape in Canada contained 257 ETFs from 6 distinct providers as of May 2013.  While their data does show strong demand and interest in ETFs with self-directed investors as well as with institutional investors, a recent article about the state of ETFs suggests that the ETF craze might be plateauing. Data from the US suggests that the sheer number of ETFs may have exceeded the interest and capital that can be allocated to them.

In short, it appears that there are hints of an oversupply of ETFs relative to demand for them. The consequence  is a predictable downward price pressure and intense competition.

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