Commission-free stock trading in Canada: what’s free and what still costs

Commission-free stock trading means a brokerage charges $0 per-trade commission on eligible stocks and ETFs. However, investors may still pay other costs, such as ECN fees, foreign exchange (FX) conversion fees on USD trades, bid-ask spreads, and certain product-specific fees. The true cost of trading depends on more than the headline commission.

What is a brokerage commission?

A brokerage commission is a fee charged by a broker to execute a trade on behalf of an investor. Traditionally, Canadian investors paid a commission each time they bought or sold stocks through an online brokerage.

Before commission-free trading became more common, discount brokerages in Canada often charged around $5 to $10 per online stock trade. Full-service investment services could involve higher costs because they may include additional support, research, or advisory services.

Per-trade commissions could have a larger impact for investors making frequent trades or those with smaller account balances. For example, a fixed trading fee represented a larger percentage of a smaller investment amount. Commission-free trading removes this direct per-trade charge for eligible securities, although other investing costs may still apply.

Who offers commission-free trading on stock and ETF trades in Canada?

The Canadian self-directed investing landscape has seen more platforms introduce commission-free trading options in recent years. For example, Questrade moved to commission-free trading for eligible Canadian and U.S.-listed stocks, ETFs, and most options.

Some platforms may offer commission-free trading for specific securities, account types, investor groups, or promotional periods. The details of these offers can vary, and pricing structures may change over time.

When comparing platforms, investors may look beyond the advertised commission amount. Other factors can include available account types, investment choices, currency features, research tools, trading technology, customer support, and other applicable fees.

Investors can review current pricing directly with each platform before opening an account or making trades, as fee structures and product availability may change.

What “commission-free” does not cover

Commission-free trading can remove one direct cost associated with buying and selling eligible securities, but other costs may still apply. The total cost of investing can depend on factors such as the type of investment, trading activity, currency requirements, and the platform being used.

ECN fees

Electronic communication network fees are small exchange routing charges that may apply when an order removes liquidity from the market. These fees are generally charged on a per-share basis and may apply to certain market orders or marketable limit orders.

ECN fees are separate from brokerage commissions. While the amount of an ECN fee may be small for individual trades, frequent trading or larger orders may make these charges more noticeable.

Currency conversion fees and FX spreads

Canadian investors buying U.S.-listed stocks or ETFs may need to convert Canadian dollars into U.S. dollars. Currency conversion costs can include a foreign exchange spread, which represents the difference between the exchange rate offered by a platform and the underlying market exchange rate.

For investors making larger U.S.-dollar transactions, currency conversion costs may represent a larger expense than the commission itself. Some platforms allow investors to hold both Canadian and U.S. dollars, which may help reduce the need for repeated currency conversions depending on the investor’s approach.

Bid-ask spreads

The bid-ask spread refers to the difference between the highest price a buyer may be willing to pay for a security and the lowest price a seller may be willing to accept.

A narrower spread may mean there is less difference between these two prices, while a wider spread may increase the effective cost of entering or exiting a position. Less-liquid securities may have wider spreads compared with securities that trade more frequently.

Product-specific fees

Commission-free pricing may apply only to certain securities. Other investment products can have different fee structures.

For example, mutual funds, options contracts, bonds, guaranteed investment certificates (GICs), and other investment products may involve different costs or pricing models. Investors may review the applicable fees for each product before making an investment decision.

Understanding these potential costs can provide a clearer picture of the overall cost of trading beyond the advertised commission rate.

Key differences between commission-free stock trading platforms

As more platforms offer $0 commission trading, investors may compare features beyond the headline price. A platform’s overall value can depend on the combination of fees, investment access, account options, and available tools.

USD account access

Access to U.S. dollar accounts can be an important consideration for Canadian investors who purchase U.S.-listed stocks or ETFs. Holding U.S. dollars directly may help some investors manage currency conversions, particularly when making multiple U.S.-dollar transactions.

The availability and rules around USD accounts can vary between platforms and account types. Investors may review how currency conversion works before selecting a platform.

Fractional shares

Fractional shares allow investors to purchase a portion of a share rather than a full share. This feature may make certain higher-priced securities more accessible, particularly for investors contributing smaller amounts.

Availability of fractional shares can vary by platform and by security. Investors may check whether this feature applies to the investments they are interested in purchasing.

Platform features and tools

Different investors may look for different platform features depending on their experience level and investment activity.

Some investors may prefer a simple mobile-focused experience for basic investing needs. Others may require more advanced features, such as:

• Desktop trading platforms

• Research tools

• Charting capabilities

• Advanced order types

• Options trading access

• IPO participation

• Bond and GIC access

• Portfolio reporting tools

A platform that supports basic ETF investing may have different features compared with a platform designed for investors who want broader investment access.

Account types and investment access

Investors may also compare available account types and investment choices. Platforms can differ in the range of accounts they support, such as Tax-Free Savings Accounts (opens in a new tab) (TFSAs), Registered Retirement Savings Plans (opens in a new tab) (RRSPs), First Home Savings Accounts (opens in a new tab) (FHSAs), Registered Education Savings Plans (opens in a new tab) (RESPs), and non-registered accounts.

Investment access can also vary. Some investors may need access to stocks and ETFs only, while others may look for additional products such as fixed-income investments, options, or international securities.

Regulatory protection

Before opening an account, investors may confirm that a brokerage is regulated by the appropriate Canadian authorities. Many Canadian investment dealers are regulated by the Canadian Investment Regulatory Organization (opens in a new tab) (CIRO) and participate in the Canadian Investor Protection Fund (opens in a new tab) (CIPF).

Regulatory registration and investor protection programs can provide information about how a platform operates and what protections may apply.

Is commission-free trading worth it?

Commission-free trading can reduce one cost that previously affected self-directed investors, particularly those making frequent purchases or investing smaller amounts regularly.

For example, if an investor previously paid $9.95 per trade and completed 20 trades per year, the annual commission cost would equal $199. On a $10,000 portfolio, this would represent almost 2% of the portfolio value before considering other potential costs such as currency conversion, bid-ask spreads, or product fees.

Removing trading commissions may make certain investing activities more accessible, including:

• Regular ETF contributions

• Dollar-cost averaging

• TFSA investing

• RESP contributions

• Building a portfolio with smaller balances

However, the total cost of investing depends on more than the commission rate. Investors may still consider ECN fees, foreign exchange fees, bid-ask spreads, account fees, and product-specific charges when comparing platforms.

What should an investor look for beyond commissions?

While commission pricing can be one factor when comparing investment platforms, investors may also consider the broader cost and feature structure.

Factors that may be relevant include:

• Account fees: Some platforms may charge annual fees, inactivity fees, maintenance fees, withdrawal fees, or transfer-related charges depending on the account and activity.

• FX conversion handling: Investors purchasing U.S.-listed securities may review currency conversion rates, USD account availability, and options for managing CAD and USD holdings.

• Investment access: Platforms may vary in the products they offer, including stocks, ETFs, options, GICs, bonds, mutual funds, and international securities.

• Platform quality: Tools such as research features, reporting, charting, order types, mobile apps, and desktop platforms may affect the overall investing experience.

• Regulatory status: Investors may confirm whether a platform is registered with the appropriate Canadian regulators and whether investor protection programs apply.

• Support and education: Customer service and educational resources may be important considerations, especially for investors who are newer to self-directed investing.

A platform’s suitability can depend on the investor’s account needs, investment goals, experience level, and preferred way of managing investments.

Bottom line on commission-free stock trading in Canada

Commission-free stock trading has changed the cost structure of self-directed investing in Canada by removing a direct per-trade commission for eligible securities. This change may be particularly relevant for investors making regular contributions, building smaller portfolios, or placing frequent trades.

However, commission-free does not mean cost-free. Investors may still encounter other expenses, including ECN fees, currency conversion costs, bid-ask spreads, and product-specific fees. When comparing investment platforms, investors may consider the full cost structure alongside factors such as account options, investment access, platform features, and currency management tools.

The right platform can depend on an investor’s account needs, investment style, security selection, trading activity, and approach to managing investing costs.