Online trading

National Bank becomes the first major Canadian bank to eliminate online trading commissions

Commission-free online trading for Canadian and U.S. stocks, plus ETFs, puts pressure on rivals

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Just in time for Canadian banking earnings season, the country’s sixth-largest bank is stepping up its game by announcing on Monday that it will scrap its online trading commissions, calling it “the most competitive online brokerage fee structure in the Canadian market”.

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The commission-free trades would take place in clients’ direct investment accounts for Canadian and U.S. stocks, as well as exchange-traded funds, the bank said in a statement. National Bank is expected to be the first major Canadian bank to do so, warning its competitors.

“The self-directed investing industry is constantly evolving, and it’s important for us to continue to innovate and not rely on the status quo, for the benefit of our clients and all investors across the country,” said Claude-Frédéric Robert, president of National Bank Direct Brokerage Group in the statement. “That’s why we’re looking for new ways to equip and support Canadian investors, and this new $0 price is another step in our efforts.

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When it comes to the costs of trading fees and their sum, many Canadians are left in the dark about their own circumstances. A 2020 survey by Canadian polling firm Leger and online brokerage firm Questrade Inc. found that 87% of Canadians either ignored or underestimated the impact of a 2% fee compared to a trading cost of 1% on their portfolio.

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Discount brokers and do-it-yourself trading apps that have hit the market in recent years have challenged banks and traditional trading services with low commission fees. Many online alternatives like Questrade and Wealthsimple Trade have low-cost base trading fees, with Questrade offering a fee range of $4.95 and $9.95. However, Wealthsimple’s platform has commission-free trading on its own brokerage, with direct trading fees of $0.

These offers reduce the fees of the major Canadian banks, with TD Direct Investing charging between $7 and $9.99; the Bank of Nova Scotia trading at fees of $4.99 to $9.99 for stocks and options on its Scotia iTRADE accounts; CIBC Investor’s Edge charges between $4.95 and $6.95 per stock and ETF trade; RBC Direct Investing has clients who pay between $6.95 and $9.95 per equity trade; and the Bank of Montreal BMO InvestorLine Self-Directed Account at $9.95.

As the pandemic has given birth to self-directed retail investors, many amateur investors in the United States have flocked to platforms like Robinhood Markets, Inc. Although the platform is not yet available in Canada, the crowd of retail traders may gravitate towards other cost options – or ones that don’t cost a dime.

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