Questrade buying and selling charges: Excellent news for Canadian buyers

Questrade fees

The change to 0% commission trades is in response to investors’ wants. Praneil Ladwa, Questrade’s journey leader, Grow my Wealth, explains the move in terms of customer expectations.

“We’ve been getting customer feedback. We’ve been looking at what customers are asking for,” he says. “We took deliberate steps to introduce zero commissions when the time was right”—that is, without taking away features or capabilities that clients had come to expect.

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Several Canadian brokerages offer temporary introductory rates of 0% and free trades (often just buy orders) on ETFs or certain families of ETFs, but few so far have copied the example pioneered by Robinhood in the U.S., offering unlimited free trades.

Part of the reason is that regulation in Canada forbids brokers from routing trades to large “market makers” that compensate the brokerages for deal flow. The practice, still employed in the U.S., has been shown to sometimes result in inferior bid and ask prices for investors compared with posting the order on the exchange itself.

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Questrade now offers commission-free trades of Canadian and U.S. stocks and ETFs on all accounts. The move obviates a frequent trader program called Advantage introduced in 2014 that enabled investors to obtain fees as low as a penny per trade. Questrade has also cut the cost of options trades to $0.99 per contract (other parties may charge options contract fees) or $0.75 for clients enrolled in a frequent trader program.

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How will Questrade profit from 0% commission trades?

So, how does Questrade, which has more than $50 billion in assets under administration, make money?

“There’s a variety of income streams that we have access to,” Ladwa says. There remain fees for things like international stock trades, securities lending, currency conversion and interest on margin accounts. The company also generates interest on uninvested cash balances in clients’ accounts. Customers in the U.S. have a choice between having their orders routed through an exchange or market makers, but all orders from Canadian accounts, even for U.S.-listed issues, go through a public exchange.

“We are a direct market participant in Canada. All of our order flow in Canada touches a Canadian exchange,” Ladwa says.

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