Investing in the stock market has become more accessible and enjoyable for Canadians, thanks to the emergence of commission-free stock trading platforms.
These new platforms have made it easier for individuals to buy stocks without incurring the costs associated with traditional brokerage services, regardless of their expertise level.
Even experienced investors with larger account balances, like myself, have swapped to commission-free trading platforms. There is simply little reason to be paying for trades these days unless you need to utilize the services offered by a full-service platform.
What I mean by this is typically the research, portfolio tracking, etc. For newcomers and those with various degrees of investing knowledge, numerous platforms now offer user-friendly apps and websites that allow you to do basic research and keep up with your holdings.
Twenty years ago, it was impossible for an investor with a $1000 account balance to get ahead. Often, commissions were in excess of $50 a trade. Now? I've seen people start with $50. It's really that easy.
Let's review some of Canada's best free stock trading platforms.
What are the best free stock trading platforms in Canada?
As of right now, there are three brokerages in Canada that offer free trades:
- Wealthsimple Trade
- National Bank Direct Brokerage
In addition to this, we'll focus on some of the best trading apps that do charge commissions but are relatively attractive due to the added features they offer.
A note before I start. To avoid me repeating it multiple times, every one of these brokerages is part of the Canadian Investor Protection Fund (CIPF) and is regulated by the Investment Industry Regulatory Organization of Canada (IIROC).
Wealthsimple Trade is a popular choice among Canadian investors, offering commission-free trades on Canadian and US stocks and ETFs.
I recently switched my entire investing account to Wealthsimple Trade, and couldn't be happier. The platform is very simple, but it's meant to be. In addition to this, the platform is rolling out options trading, a newer feature for those looking to speculate on stock movements.
The platform is known for its user-friendly interface, making it easy for beginners to start trading. It is available as a mobile app, providing convenience for users to trade on the go.
The platform caters to newer investors. However, as it establishes itself in the investing world, more and more large accounts are shifting to the platform.
For beginners, no account minimums and no inactivity fees are a must. Online brokers typically charge these fees, often anywhere from $25-$100 a quarter, and they can be crippling to new investors.
With the addition of US accounts, you'll be able to buy and hold US stocks, which is key to a diversified portfolio. Of note, you will have to pay for Wealthsimple's subscription package until you hit $100,000 a month, giving you these USD accounts for free.
In my opinion, for someone looking for the most bare-bones, free stock trading app, it's tough to argue with Wealthsimple.
National Bank Direct Brokerage
National Bank Direct Brokerage (NBDB) is a no-commission trading platform the National Bank of Canada offers. They were the first Big 6 Bank to come out with commission-free trades, which was certainly big news. The key difference between something like Wealthsimple Trade and NBDB is the fact that the National Bank has a lot more bells and whistles to it.
The platform gives Canadians access to research reports, charting, analyst recommendations and more.
This platform offers access to various investment products, including Canadian and US stocks, ETFs, options, and international markets. NBDB is available on both web and mobile platforms and features comprehensive research tools to help investors make informed decisions.
Additionally, the platform offers educational resources and support through phone, live chat, and email.
There are no minimum deposits with National Bank Direct Brokerage, and it is certainly one of the best self-directed investing platforms out there for those looking for zero fees with a bit of functionality.
Desjardins Online Brokerage is another option for Canadian investors seeking commission-free trading on select ETFs. This is arguably the lesser-known of the three when it comes to commission-free platforms, but it does offer some nice functionality.
For one, commissions for online security trades outside of options and fixed income are completely free.
You'll pay $8.75 minimum per contract for options and $50 minimum per fixed-income trade.
In addition, if you are an active trader who makes more than 10 trades a month and carries a balance greater than $15,000, they'll give you access to their Market-Q platform. Make 41 trades per month? They'll give you their Level 2 data for free, which would otherwise cost you $105 a month.
Desjardin does have a $ 30-a-quarter inactivity fee. However, it is fairly simple to avoid the fee. Carry a balance of $15,000 or more, hold an RRSP, RRIF, or RESP account, or make 6 trades in a year, and the company will waive the fee.
Commission-free ETF platforms for more passive investors
Buying stocks is a rock-solid strategy for building long-term wealth. However, some investors simply want to set and forget a portfolio, which you can do with exchange-traded funds.
Many brokerages offer free commissions on particular exchange-traded funds. So, if you're looking to become a passive ETF investor, your options are much wider in terms of the brokerage you can choose.
A caveat with this, however. Many of these brokerages, outside of the truly commission-free ones, may have limitations as to what ETFs you can trade for free. For example, Qtrade often updates a list of commission-free ETFs it offers, and for any fund that is not on that list, you'll have to pay a commission to buy and sell.
Here are the brokerages that offer free ETF trades in Canada at this time
- Wealthsimple Trade
- National Bank Direct Brokerage
- TD Easy Trade
Which is the best commission-free trading platform?
Overall, I'd probably choose Wealthsimple Trade if I were to sign up for a commission-free platform today. The user interface is amazing; the instant deposit functionality makes sure I can deposit today and buy today instead of waiting, and their mobile app is the best of the bunch.
Sure, it doesn't have all the bells and whistles, but I think with what is available on the internet today, this functionality at a brokerage level isn't needed all that much.
Wealthsimple Trade is my winner, no doubt.
Platforms where you can unlock free trade bonuses or cash back
Major brokerages have undoubtedly caught on to Canadians wanting and demanding free trade. And although these platforms won't outright offer people unlimited free trades, sometimes the bonuses they offer are very lucrative and worthy of consideration.
Qtrade is a well-known Canadian platform offering commission-free ETFs and stock trading.
They have a user-friendly interface, making it easy for investors to navigate and execute trades.
Their portfolio monitoring and simulation tools are some of the best I've witnessed out of any of the major brokerages, and if you have over $500,000 in assets, they cut your commission down to $6.95.
Qtrade has a multitude of offers they run at varying times, including things like cash back, free trades, and more. Click below to see what offer they have running right now. Sometimes, their cash-back promotions can end up paying for a boatload of trades anyway, allowing you to unlock their comprehensive platform for free.
TD Easy Trade
Another prominent platform in Canada offering zero-commission trading is TD Easy Trade by TD Bank. Don't confuse this with TD Direct Investing. They're two very different platforms. Easy trade is the no-frills version, created to compete with platforms like Wealthsimple Trade.
This platform gives users the ability to trade stocks without any fees. You'll get up to 50 free trades per year.
TD Easy Trade offers a range of investment options, including stocks, ETFs, and mutual funds. This platform also provides access to market news and events, but I wouldn't depend on it for any sort of advanced-level screening, charting, or anything else.
If you're a stickler for a Big 5 Bank brokerage, this one is probably the best out there right now for free trades.
Questrade is a highly reputed Canadian platform allowing investors to trade stocks, ETFs, and other investment vehicles at zero or low commission rates. Remember, this is not a commission-free brokerage but will routinely offer promotions for free trades on a short-term basis or level 2 data.
It does, however, offer free ETF purchases. So, investors can build a diversified portfolio without paying any commission fee. Additionally, Questrade provides comprehensive research tools and resources. It is a discount brokerage, but I'd say it's more of a blend of a full-service and discount brokerage platform because it does have a ton of functionality.
How do commission-free platforms make money?
Despite offering free trades, these platforms still need to make money to support their operations. They generate revenue through various channels, including margin lending, currency conversion fees, managed investing accounts, and payment for order flow.
Currency conversion fees
Many commission-free platforms offer the opportunity for investors to trade stocks listed on international and US exchanges... To allow investors to do this, the platform must convert the investor's local currency to a foreign exchange currency.
Platforms typically charge a currency conversion fee as a spread between the market exchange rate and the rate offered to investors. This fee serves as an additional source of income for the platform.
For example, you'll be charged 1.5% at Wealthsimple when exchanging your CAD for USD.
Some commission-free trading platforms offer managed investing accounts as an optional service. Wealthsimple has its robo-advisor service, and Questrade has its QuestWealth portfolios, for example.
These managed accounts typically charge a particular percentage of your assets yearly. Undoubtedly, it is a big money business for many of these brokerages.
When investors trade on margin, they borrow money from the trading platform to buy or sell stocks. This allows them to leverage their investments and potentially earn higher returns.
Commission-free platforms make money by charging interest on the margin loans provided to investors. The interest rates vary depending on the loan's size and the borrowing period's duration.
Accounts with larger margin balances and a long-standing history with the brokerage can often negotiate lower margin rates. But generally, the rate is charged depending on the current prime rate here in Canada.
Payment For Order Flow
Payment for order flow is a practice where a brokerage firm receives a small payment, typically from a market maker or another trading firm, in exchange for directing its clients' orders to those firms.
Keep in mind, brokerages are not allowed to do this on Canadian stocks. However, they can charge payment for order flow on US securities.
Here's a simple way to understand it:
- You Decide to Buy/Sell Stocks: Imagine you want to buy or sell company shares through a brokerage app or website.
- Brokerage Sends Your Order Elsewhere: Instead of directly executing your order, your brokerage sends it to someone else, known as a market maker.
- Market Maker Pays Your Brokerage: In return for sending them your order, the market maker pays your brokerage a small fee. This is the "payment for order flow."
- Why Do Market Makers Pay?: Market makers are interested in buying and selling stocks frequently and in large volumes. By getting orders from brokerages, they have a steady flow of trades, which allows them to make profits on small differences in buying and selling prices.
- Impact on You: For you as an investor, this practice can mean your trades are free or low-cost, as the brokerage earns money from these payments instead of charging you higher trading fees.
However, there is a debate about whether this practice is completely beneficial for investors, as it could potentially lead to worse prices on your trades (though usually by a very small amount).
Choosing a commission-free trading platform
Discount vs Full-Service
No-frills and discount platforms suit investors who want a straightforward experience focused on buying and selling stocks without additional features. These platforms typically offer:
- Commission-free trading on stocks
- Easy-to-use interfaces
- Basic research and analysis tools
- Generally aimed towards more novice investors
A prime example of a no-frills platform would be Wealthsimple Trade, and a discount brokerage would be Questrade.
On the other hand, full-service platforms cater to investors looking for a more comprehensive experience, offering:
- Advanced research and analysis tools
- Enhanced charting capabilities
- Options trading and other advanced trading features
- Generally aimed toward more experienced investors
An example of a full-service brokerage would be something like CIBC Investor's Edge, Scotia ITrade, RBC Direct Investing or Qtrade.
To decide between the two, investors must weigh their priorities, trading style, and frequency of use.
Make sure the brokerage you go with has the accounts you need
When selecting a commission-free trading platform, ensuring it accommodates your desired account types is essential.
- Individual or Joint Accounts: These are standard investment accounts that can be held by one or multiple people.
- Registered Retirement Savings Plan (RRSP): A tax-advantaged account designed for retirement savings
- Tax-Free Savings Account (TFSA): A versatile account allowing tax-free investment growth
- Locked In Retirement Account (LIRA): Typically a self-managed pension account.
- Non-registered accounts: These are taxable investment accounts and are offered at virtually every brokerage.