# National Bank Brokerage eliminates transaction fees for all Canadian ETF



## larry81 (Nov 22, 2010)

> MONTREAL, Sep. 2, 2016 (Canada NewsWire via COMTEX) -- National Bank Direct Brokerage, a subsidiary of National Bank of Canada (NA) and a leader in online brokerage, announced that all of its clients will be able to trade online every Canadian-listed Exchange Traded Fund (ETF) on the Toronto Stock Exchange without any transaction fees. There are no restrictions related to account size or number of transactions, to the extent that a minimum of 100 shares must be traded. The announcement makes National Bank Direct Brokerage the first Canadian online brokerage firm to offer commission-free trading of every ETF listed in Canada.


http://www.marketwatch.com/story/a-...ange-traded-funds-listed-in-canada-2016-09-02


----------



## humble_pie (Jun 7, 2009)

larry81 said:


> http://www.marketwatch.com/story/a-...ange-traded-funds-listed-in-canada-2016-09-02




a sign that the brokerage is being subsidized by the ETF industry. The kickback may be only nano-fragments of a penny per lot but it has to be there.

the big 5 chartered banks are steadily moving into the robo advisor sector. TD is developing its own suite of ETFs, will be introducing robo services soon. BMO has been huge with its smartFolio robo for years. Power Financial has a big position in a small privately owned robo advisor. Can natBank & the other banks be far behind?

robos are being marketed to millennials as the smart low-cost way to manage investments without ever having to learn anything. No need to consult an expensive financial planner because he'll only end up selling the same basic couch potato plan that a robo could build for peanuts.

as YoungandThrifty says:

_"... a financial solution that is easy to access and will take less than ten minutes a month to implement ... robo advisors are an excellent alternative to traditional ways of managing money and they specifically represent a superb value for the vast majority of Canadian millennials."
_
http://youngandthrifty.ca/complete-guide-to-canadas-robo-advisors/

.


----------



## Woz (Sep 5, 2013)

humble_pie said:


> a sign that the brokerage is being subsidized by the ETF industry. The kickback may be only nano-fragments of a penny per lot but it has to be there.


There could be other benefits to them beyond just a kickback from the ETFs. In fact, I’m a bit sceptical there’s a kickback at all, otherwise I’d expect it to be limited to certain ETF providers (i.e. Vanguard ETFs only).

It could be that ETFs are popular enough that they may have a large dark pool so filling market orders doesn’t cost them anything and they pocket any kickbacks for adding liquidity. They could also be lending out shares.


----------



## humble_pie (Jun 7, 2009)

^^

woz you're right of course. All these aspects are possibiities. 

but - notwithstanding the sugary/buttery language of the natBank news release saying how it aims so altruistically to assist investors for free - the discount brokers cannot be doing this at a negative cost to themselves.

plus it's true that the big banks are crowding into robo land. I'm surprised to see YoungandThrifty saying that a significant number of millennials don't want to learn anything about investing, therefore ultra low cost robo advisors are the financial plan solution for them. I guess we've been spoiled, here in cmf forum, by so many genuinely talented young people as members.


.


----------



## latebuyer (Nov 15, 2015)

Isn't 100 shares quite a lot? I just bought 37 shares today.


----------



## AltaRed (Jun 8, 2009)

latebuyer said:


> Isn't 100 shares quite a lot? I just bought 37 shares today.


Depends on one's perspective. If/when I buy/sell ETFs, it would often be in 1000+ unit transactions and I think there may be many investors who do that sort of thing.

I find this trend of 'trading ETFs for free' to be an unwelcome trend. There has to be something in it for the brokerages and as HP suggests, they ain't doing it for free. And if their margins are getting squeezed, that means they will be trading something off in their website offerings, e.g. research, to keep profits up. A $10 commission has negligible consequences for a true investor (as compared to a trader).


----------



## james4beach (Nov 15, 2012)

TD is developing its own ETFs... again? Funny, because over a decade ago, TD had some of the first ETFs in Canada including "TTF" which they later discontinued


----------



## doctrine (Sep 30, 2011)

This isn't negative cost. 100 shares is a lot, sure if you had $50k you could probably have 7-8 ETFs at 200-300 shares in a balanced portfolio, but if you wanted to rebalance regularly you'd very likely end up with some fees sooner or later. And if not, then National Bank is at the worst attracting money and clients - to whom they already know how much they make from other fees (upgrades to trading accounts, more clients to sell investment bank offerings to, etc etc). I'm sure some smart people have already done the math and it's going to work out for them. It wouldn't be enough to make me switch, however, I can still buy 1 share at Questrade of any Cdn ETF without a commission, which makes quarterly rebalancing very cheap.


----------



## Market Lost (Jul 27, 2016)

Woz said:


> There could be other benefits to them beyond just a kickback from the ETFs. In fact, I’m a bit sceptical there’s a kickback at all, otherwise I’d expect it to be limited to certain ETF providers (i.e. Vanguard ETFs only).
> 
> It could be that ETFs are popular enough that they may have a large dark pool so filling market orders doesn’t cost them anything and they pocket any kickbacks for adding liquidity. They could also be lending out shares.


Actually, HB is correct that this happens all the time, but this isn't a kickback, it's an acceptable program cost that is open to everyone. I haven't looked into NA's practice, but I have an old bookmark from Charles Schwab that show how they work.

http://www.schwab.com/public/schwab...ice_disclosures/schwab_compensation.html#etfs


----------



## Market Lost (Jul 27, 2016)

doctrine said:


> This isn't negative cost. 100 shares is a lot, sure if you had $50k you could probably have 7-8 ETFs at 200-300 shares in a balanced portfolio, but if you wanted to rebalance regularly you'd very likely end up with some fees sooner or later. And if not, then National Bank is at the worst attracting money and clients - to whom they already know how much they make from other fees (upgrades to trading accounts, more clients to sell investment bank offerings to, etc etc). I'm sure some smart people have already done the math and it's going to work out for them. It wouldn't be enough to make me switch, however, I can still buy 1 share at Questrade of any Cdn ETF without a commission, which makes quarterly rebalancing very cheap.


I would call having 7-8 ETFs over-diversification, especially in a such a small portfolio.


----------



## AltaRed (Jun 8, 2009)

Market Lost said:


> I would call having 7-8 ETFs over-diversification, especially in a such a small portfolio.


I would call it active investing. 3-4 ETFs will do the job for an index investor. Anything more than about 5 is slice and dice which, I suppose, is just another way of stock investing where a "sector" is a proxy for a "stock". Example: XEG being a proxy for SU.


----------



## Argonaut (Dec 7, 2010)

This is good news, hopefully it leads to a trend of other bank brokerages doing the same thing. Unfortunately though, most Canadian ETFs kind of suck. The only example I can think of that would interest me is the DLR/DLR.U combination for near-costless gambitting.


----------



## Market Lost (Jul 27, 2016)

AltaRed said:


> I would call it active investing. 3-4 ETFs will do the job for an index investor. Anything more than about 5 is slice and dice which, I suppose, is just another way of stock investing where a "sector" is a proxy for a "stock". Example: XEG being a proxy for SU.


In a large portfolio, you could use ETFs to do some rather unique things, but what does it add in a portfolio of $50K, other than having more to worry about?


----------



## james4beach (Nov 15, 2012)

Argonaut said:


> Unfortunately though, most Canadian ETFs kind of suck.


There are still some great ones. XIU has been around since 1999, trades tens of millions of shares daily (extremely liquid) and has 6.9% annual return since inception. And while paying out nearly 3% dividends, all eligible dividends. That's nothing to sneeze at! This has been a great ETF and continues to be.

XIC and ZCN have taken that management fee even lower, at rock-bottom 0.06% for TSX Composite exposure. Beautiful!

Some of the bond ETFs are pretty amazing too. These ones have been around since 2000 ... XBB with annual return of 5.7% since inception, and XSB at 4.4% since inception have both been top performers vs even the best mutual funds. And then Vanguard came along and dropped fees, making the new de facto funds VAB and VSB (real winners IMO).

I think all of these are pretty great ETFs.


----------



## AltaRed (Jun 8, 2009)

Market Lost said:


> In a large portfolio, you could use ETFs to do some rather unique things, but what does it add in a portfolio of $50K, other than having more to worry about?


Agreed it does nothing in a smaller portfolio, even one of $200k or so size. In my not so humble opinion, I don't know why anyone with less than $500k in a portfolio would mess with anything more than a Couch Potato 3-4 ETF portfolio (asuming the intent to hold ETFs in the first place is to go passive). 

At $1 million or more, one might be tempted to slice and dice a bit around the edges. FWIW, I provide input to a few ETF portfolios in the multi-million range and there is a bit of slicing and dicing there, e.g. CPD and ZRE, but no other 'sector' ETFs. When one is not 'hands on' with market cycles and sector rotation timing, it is a highly dangerous game. XIC and VTI do perfectly fine without trying to get a few decimal points of 'alpha'.


----------



## Argonaut (Dec 7, 2010)

james4beach said:


> There are still some great ones. XIU has been around since 1999, trades tens of millions of shares daily (extremely liquid) and has 6.9% annual return since inception. And while paying out nearly 3% dividends, all eligible dividends. That's nothing to sneeze at! This has been a great ETF and continues to be.
> 
> XIC and ZCN have taken that management fee even lower, at rock-bottom 0.06% for TSX Composite exposure. Beautiful!
> 
> ...


The problem with XIU is not the ETF itself, i.e. liquidity and cost, but its holdings. There's just so much junk in there that is easily avoided with a portfolio of 5-12 stocks. You get stocks with high volatility and low returns like oil producers and miners in XIU. And names that you know are losers like Blackberry and Valeant. High quality dividend stocks are still low-risk and high-reward, and have been for the last few years while the TSX is flat.

With bond ETFs you're looking too much at the past returns. Future returns in those are not possible to replicate unless we go into negative interest rate territory, which is stupid and dumb and destroys all financial and investing logic anyways. Better cash than that junk currently yielding 1% and costing 0.5%.


----------



## humble_pie (Jun 7, 2009)

Argonaut said:


> The problem with XIU is not the ETF itself, i.e. liquidity and cost, but its holdings ... With bond ETFs you're looking too much at the past returns.



but how do we know what, exactly, they're holding vs what they've loaned out or are holding as samples or derivative bundles.

ETF prospectuses often say they are mandated to carry out representational sampling, hold futures and/or options contracts. But their audited financial statements, in canada, never show which securities are out on loan or held by proxy. An exception i've noticed is horizons betaPro, but even this fund company does not show the specific circumstances pertaining to each security it "holds."


.


----------



## AltaRed (Jun 8, 2009)

Also, Argonaut forgets the majority of investors are quite happy with market returns (less fees) and that *is* the beauty of the likes of XIC. Even most active money managers cannot provide enough alpha to beat the index either on a consistent basis long term. FWIW, I suspect most here cannot do it long term either. With some obvious exceptions, how many here have a 20 year stock picking track record that matches/beats the TSX?

The argument for index investing in most instances.


----------



## Argonaut (Dec 7, 2010)

I don't decry index investing in general, just that the TSX is a bad index. For every dollar you invest, 69 cents is going into only 3 sectors. And two of those sectors are heavily tied to commodity prices. It's poor diversification, and lots of the names in them are just uninteresting investments. The Canadian market is small enough that it pays to know what you're putting your money into. Didn't Nortel comprise over a third of the index at one point? Crap index. The TSX 60 isn't some magical thing, just a collection of 60 stocks. And maybe it doesn't even own them, like humble says.

The S&P 500 is a good index, and much harder to beat.


----------



## AltaRed (Jun 8, 2009)

Agreed the TSX is not a well balanced index. But for the bulk of investors who 'should' be in ETFs (at least passive indexing) and not a single stock, there is not much to choose from. One can either hold their nose and 'live with it', or consider the Cdn market equivalent to an Emerging Market and pick the AA slice appropriately, or slice and dice the Cdn market with a specialty ETF like ZLB for example that eliminates some of the crap. 

There are Canadians who would invest on the basis of market cap and hold the Cdn equity component to perhaps 5% (or 10% if one is brave).


----------



## Eclectic12 (Oct 20, 2010)

james4beach said:


> There are still some great ones. XIU has been around since 1999, trades tens of millions of shares daily (extremely liquid) and has 6.9% annual return since inception. And while paying out nearly 3% dividends, all eligible dividends. That's nothing to sneeze at! ...


I can agree that I like XIU.

The part about "all eligible dividends" is at best an exaggeration.

Looking at the yearly breakdown available on the iShares web site, from 2015 to 1999, I can't find a single year where the cash paid was 100% eligible dividends.

2015 to 2006 are the closest with anywhere from 99.0% down to 39.3% as eligible dividends. 2005 through 1999 has 0% eligible dividends.


I haven't bothered to dig out the phantom distributions as the yearly breakdown on it's own is enough to show that "all eligible dividends" is not correct.


Cheers


*PS*

Out of interest, 2007 is the most complicated year with Eligible Dividends, Non-Eligible Dividends, Other Income, Capital Gains and RoC. 

RoC is in every year except 2015, which has Eligible Dividends and Capital Gains.


----------



## Market Lost (Jul 27, 2016)

AltaRed said:


> Also, Argonaut forgets the majority of investors are quite happy with market returns (less fees) and that *is* the beauty of the likes of XIC. Even most active money managers cannot provide enough alpha to beat the index either on a consistent basis long term. FWIW, I suspect most here cannot do it long term either. With some obvious exceptions, how many here have a 20 year stock picking track record that matches/beats the TSX?
> 
> The argument for index investing in most instances.


The TSX is not that hard to beat. I compared my returns since I re-entered the stock market 9 years ago, and I'm doing 3 times a well as the dividend re-invested XIU. In fact the re-invested XIU has a CAGR of a mere 3.61%, which is less than the dividends of any major FI that I've tracked in some time. 

The problem with the TSX is that it is always hampered by the cyclical nature of commodities, and always has some stock darling that roars out of nowhere to best RY in market capital, which inevitably ends in the stock crashing - known as the Royal Bank Curse.


----------



## james4beach (Nov 15, 2012)

humble_pie said:


> [regarding bond ETFs] but how do we know what, exactly, they're holding vs what they've loaned out or are holding as samples or derivative bundles.


I'm with you there, humble_pie and bond ETFs are particularly bad for this - with some of the highest securities lending rates I found. That's another reason why I hold my bonds individually (see thread)... I know exactly what I hold. I do not hold a single bond ETF.



AltaRed said:


> Also, Argonaut forgets the majority of investors are quite happy with market returns (less fees) and that *is* the beauty of the likes of XIC. Even most active money managers cannot provide enough alpha to beat the index either on a consistent basis long term. FWIW, I suspect most here cannot do it long term either.


I can tell you that I have NOT beaten the TSX myself. I would have been better off if I had exclusively held XIU or XIC for all these years. Sure, I can shoot for better -- and I am -- but as a starting point, I'd love to perform as well as XIU.



Argonaut said:


> I don't decry index investing in general, just that the TSX is a bad index.





AltaRed said:


> Agreed the TSX is not a well balanced index ... or slice and dice the Cdn market with a specialty ETF like ZLB for example that eliminates some of the crap.


This is a very interesting point, that the TSX is just a bad index. OK, let's say that this is true. Is there a Canadian ETF that does a better job of achieving balanced sector exposure? ZLB's holdings reflect a good balance but balancing the sectors is not an intrinsic goal of ZLB.

You can read ZLB's strategy in this paper. They rank stocks by 5-year beta and choose the lowest betas. Single stock exposure is capped at 10% and sectors are capped at 35%.


----------



## doctrine (Sep 30, 2011)

The TSX is a bad index, but there are no good alternatives for the Canadian market. Most investors who are interested in avoiding the under-diversification will use individual stocks or perhaps sector ETFs like ZRE. The Two Minute Portfolio has consistently beaten the TSX over the long term with lower volatility, but there's no index or ETF that follows it.


----------



## AltaRed (Jun 8, 2009)

james4beach said:


> This is a very interesting point, that the TSX is just a bad index. OK, let's say that this is true. Is there a Canadian ETF that does a better job of achieving balanced sector exposure? ZLB's holdings reflect a good balance but balancing the sectors is not an intrinsic goal of ZLB.
> 
> You can read ZLB's strategy in this paper. They rank stocks by 5-year beta and choose the lowest betas. Single stock exposure is capped at 10% and sectors are capped at 35%.


The problem with the TSX index as manifested by the TSX60 or TSX Composite simply is it has way too many cyclicals* in it (energy and materials) which have a habit of destroying shareholder value and drag down index performance. Hence the index investor may be able to find a boutique ETF that eliminates much of the cyclicals....which is what ZLB tries to do. It is not perfect by any stretch but I think it is a reasonable substitute for almost predictable nosebleeds on the rollercoaster. 

Canucks generally got too used to having success during the supercommodity cycle of the past 15 years or so (the rise of the Chinese dragon). It ended a few years ago and is not about to return..unless you believe India will become the next China out of the cage. Toronto will likely lag global growth for potentially decades to come. Our PM and his cronies have yet to figure that out, i.e. no amount of deficit/infrastructure spending can overcome that hurdle.

* cyclicals are best traded (market timed)


----------



## james4beach (Nov 15, 2012)

I agree and am convinced that we're poorly diversified the sectors are out of whack, but I'm still not convinced that the commodity exposure has been harmful to returns. Here are 20 year total returns, annual avg (April 1996 - April 2016). Remember this is a period that includes a commodities boom *& bust*

Germany/DAX 8.11%
US/S&P500 7.05%
Canada/TSX 6.09% <-- we are here
Australia/AORD 5.28%
France/CAC 4.93%
UK/FTSE 3.60%
Japan/Nikkei -1.11%

Has the commodity exposure really hurt us? TSX is one of the top performers in this global ranking and honestly, quite close to the US return. Remember... as diversified as they are, they also had high tech weighting pre tech crash and then heavy financial weighting pre financial crash.

Focusing on just the last 5 years is one thing, but when I look at that 20 year ranking I can't be convinced that the TSX is a bad index.


----------



## james4beach (Nov 15, 2012)

I also should point out in that 20 year return, that commodities broadly have been quite weak. Here is the $CRB index over those 20 years. The $CRB is actually lower today than 20 years ago! http://stockcharts.com/h-sc/ui?s=$CRB&p=D&st=1996-04-04&en=(today)&id=p24969657004

That's showing a sideways market in commodities: really just one big rally 2002-2008, but otherwise very weak.

If the TSX has been an upper-tier performer over the 20 years, and close to US performance, and all of this happened during a sideways market in commodities - how can you argue that commodity exposure makes the TSX a bad index?

In fact that sounds really attractive to me. Even during a poor commodities market, we performed among the world's best markets. Now just imagine that we enter a secular bull market in commodities.


----------



## AltaRed (Jun 8, 2009)

Just imagine if you didn't have commodities dragging down the TSX, where the TSX would be today.


----------



## agent99 (Sep 11, 2013)

AltaRed said:


> Just imagine if you didn't have commodities dragging down the TSX, where the TSX would be today.


Canada is a country that thrives on it's natural resources/commodities. If we didn't have them, perhaps the TSX would have matched the FTSE??


----------



## AltaRed (Jun 8, 2009)

agent99 said:


> Canada is a country that thrives on it's natural resources/commodities. If we didn't have them, perhaps the TSX would have matched the FTSE??


True that commodities/resources have been the foundation of the Canadian economy and what has been fed off of. e.g. banks, pipelines, utilities, etc, etc. Just don't own the commodity/resource stocks themselves or XEG (unless one is a trader). 

Who knows what the TSX would be without our commodity/resource sector. Probably a mere backwater in the global arena.


----------



## james4beach (Nov 15, 2012)

This may be useful to look at. The Credit Suisse Global Investment Returns Yearbook 2015
https://publications.credit-suisse.com/tasks/render/file/?fileID=AE924F44-E396-A4E5-11E63B09CFE37CCB

And Yearbook 2016
http://publications.credit-suisse.c...fm?fileid=80603618-9230-382D-C51FF70FAF7A4A65

Some things to note:

1. (In the 2015 yearbook) Figure 11 shows % concentration weighting of each country in its dominant 3 sectors. This is what people are voicing concern about for Canada in this thread. But look at the ranking: Canada shows reasonably good sector diversification. Germany and many other countries are showing higher sector concentration than Canada. *In terms of sector concentration, Canada does NOT stand out as a problem here.*

2. Read the Canada summary (2016, page 41). Read this and tell me whether we actually have a problem. I think some of us here have to actually update our impression ... we are (in typical Canadian fashion) being overly humble about our capital markets. Here's their text: "it is now the world’s sixth-largest stock market by capitalization. Canada’s bond market also ranks among the world’s top ten . . . Canadian equities have performed well over the long run, with a real return of 5.6% per year. The real return on bonds has been 2.3% per year. *These figures are close to those we report for the United States*."

3. That 5.6% long term real return in Canada (since 1900 by the way) exceeds the 5.0% real return for global diversification (page 61). If you look at the world ex USA, the average real return is only 4.3% (page 62).

My conclusion: I think objectively, it's clear that Canada has been one of the best performers in the world, apparently going back to 1900. We are far above the ex-USA average. We are even close to U.S. returns. In the global comparison, we are not particularly concentrated in our top 3 sectors. And I think what's very important here is that our capital markets have grown to the point we are among the largest in the world. This is a very, very good profile for a country. Are the Credit Suisse people using the TSX Composite for these calculations?


----------



## latebuyer (Nov 15, 2015)

I realize no one on this board are mutual funds fans but i thought i'd point out beutel goodman small cap. It has a longer history then zlb and a 36% allocation to small caps. Zlb has performed better but it has a much shorter history. I thought some stocks in zlb are supposed to be overvalued but i'm not clear what that means.


----------



## AltaRed (Jun 8, 2009)

latebuyer said:


> I realize no one on this board are mutual funds fans but i thought i'd point out beutel goodman small cap. It has a longer history then zlb and a 36% allocation to small caps. Zlb has performed better but it has a much shorter history. I thought some stocks in zlb are supposed to be overvalued but i'm not clear what that means.


Small caps and ZLB are not comparable in any shape or form. Small caps ARE an area where a competent money manager of a mutual fund can make a difference. BG's small cap is one of them.

ZLB is at the higher end due to high priced constituents and that is at least partly because of refugees from fixed income who still want a relative sense of safety/security. The dilemma is whether it will ever be 'cheap'. I've been suggesting it to people I provide opinions too but caution that it is expensive and may remain so for some time.


----------



## humble_pie (Jun 7, 2009)

james4beach said:


> This may be useful to look at. The Credit Suisse Global Investment Returns Yearbook 2015
> https://publications.credit-suisse.com/tasks/render/file/?fileID=AE924F44-E396-A4E5-11E63B09CFE37CCB
> 
> And Yearbook 2016
> ...




this is a surprising post since it goes against the conventional wisdom that canada is doomed to a role as hewers of wood & drawers of water (we ought to have changed that water to oil in the past, but now & for the future water may be more significant.)

one should read also james4's posts Nos 26 & 27 above.

have canadian markets truly done so well for a century? i've always inclined to believe this. I've always believed that canadian multinationals are among the most capable in the world.

i've always believed that a simple or smaller portfolio (>$500k for example) could gain international exposure by holding shares of canadian multis with extensive foreign operations. Foreign being defined as including the US. The list of canadian corporations with 80% or more of their business in the US or overseas is extensive. A tiny sample: brookfield, cn rail, constellation software, potash, snc lavalin, onex. Not to speak of the usual suspects: big oilcos, big oil service, big forest products, big miners.


.


----------



## latebuyer (Nov 15, 2015)

Thanks for the explanation, Altared. I was actually thinking of allocating 10% to the small cap fund. For some reason it is quite high in consumer cyclical which zlb and xic are low in which should complement them and it is lower in oil while still having exposure to it (10%) I may be slicing and dicing my canada allocation too much. I sure wish i had bought up xic on the dip instead of avoiding it but i'm not sure what will happen with oil.


----------



## james4beach (Nov 15, 2012)

AltaRed said:


> Small caps ARE an area where a competent money manager of a mutual fund can make a difference. BG's small cap is one of them.


Wow, Beutel Goodman Small Cap really is a fine looking fund
http://quote.morningstar.ca/QuickTakes/fund/f_ca.aspx?t=F0CAN05MR5&region=CAN&culture=en-CA

Those performance figures are spectacular.
10 year annual return of 9.0% (vs 5.0% for TSX)
15 year annual return of 10.9% (vs 7.2% for TSX)

What's the catch? It doesn't even seem particularly volatile; the 2008 drop was the same as the TSX.


----------



## latebuyer (Nov 15, 2015)

With an active manager there is a chance it could flop. It does seem high in consumer cyclicals at 26%. It does seem highly correlated with xic although by the looks of last year it will perform better if oil is low as it has an 11% oil allocation. I agree it doesn't seem particularly volatile.


----------



## AltaRed (Jun 8, 2009)

The key is a good fund manager who digs into the businesses of the small caps can likely add 'material' alpha. As individual stocks, small caps ARE way more volatile than the overall TSX because many of them crash and burn while others are spectacularly successful in either organic growth or being acquired once some success is acheived. On the whole though, they get dragged along by the overall market sentiment. 

A passive ETF cannot differentiate ahead of time which small caps are likely to flame out and/or break out, while a good fund manager can do so. A fund manager also has way more reesources to analyze a small cap and get in the front door to its management than an individual investor can. IF I wanted to play in that market, I would definitely go with a small cap fund manager with a track record.


----------



## like_to_retire (Oct 9, 2016)

National Bank Direct Brokerage announces new zero-commission on all stocks and ETF's.

I wonder if the other banks will follow suit. Doesn't zero commissions encourage a lot of crazy trading?

ltr


----------



## AltaRed (Jun 8, 2009)

It does and the brokerages may make more money off order flow as has been discussed elsewhere from time to time. IOW, the retail investor doesn't necessarily get best pricing and that is where brokerages pick up the delta. Remember... nothing is free. 

This is of no real interest to me for the 2-4 trades I might do in a year (one each in my TFSA and RRIF for sure).


----------



## like_to_retire (Oct 9, 2016)

AltaRed said:


> This is of no real interest to me for the 2-4 trades I might do in a year (one each in my TFSA and RRIF for sure).


Yeah, that's about how many trades I make in a year too, and they're usually of a size that $10 doesn't matter much as a commission. 

But I do feel the minimum $10 fee is useful to keep the uninitiated from blowing their brains out and losing their shirts. It allows ridiculously small trades to be made. 

Back when we had to buy in board lots (100 shares) and the commission price was $100, you had to spend quite a bit of time fussing over a trade before you pulled the trigger - and rightly so. Now it seems there's an abandonment of board lots and people are regularly trading in tiny odd lots without any problems.

I can certainly see changes to distribution re-investment strategies if the commissions eventually end up at zero. Often the $10 commission is enough to convince an investor that ETF distribution re-investment is too complicated or expensive and they'll choose to stay with mutual funds.

ltr


----------



## kcowan (Jul 1, 2010)

like_to_retire said:


> National Bank Direct Brokerage announces new zero-commission on all stocks and ETF's.
> 
> I wonder if the other banks will follow suit. Doesn't zero commissions encourage a lot of crazy trading?
> 
> ltr


Following Schwab's lead!


----------



## gibor365 (Apr 1, 2011)

like_to_retire said:


> Yeah, that's about how many trades I make in a year too, and they're usually of a size that $10 doesn't matter much as a commission.
> 
> *But I do feel the minimum $10 fee is useful to keep the uninitiated from blowing their brains out and losing their shirts. It allows ridiculously small trades to be made.*
> 
> ...


I don't agree that $10 is usefull..... no fee trades allow investors for example to DCA small amounts every month or so on specific ETFs or stock without investing large amount in 1 shot. 
AFAIK, US discount brokerages offer no fee trades for a long time. For example TD Ameritrade has no trading fees and TD in Canada charge ridiculous $9.95.


----------



## gibor365 (Apr 1, 2011)

like_to_retire said:


> National Bank Direct Brokerage announces new zero-commission on all stocks and ETF's.
> 
> I wonder if the other banks will follow suit. Doesn't zero commissions encourage a lot of crazy trading?
> 
> ltr


My wife, who is executive in one of big 5, brought me those news , they were discussing it yesterday and there are some worries about NA move...
Probably other banks would at least reduce fees...

In any case, is anyone here using National Bank Direct Brokerage ?! I'm curious if there are some catches behind this announcment?


----------



## gibor365 (Apr 1, 2011)

After National bank discount brokerage set trading fees to $0, i sent inquery to CIBC IE

Just received email from my rep in CIBC IE

_We are gathering feedback from clients now.
It is being discussed at the Management level now.
I will share any major updates with you.
Thanks for your input.
I will communicate it now._

So, guys who have accounts in CIBC IE, please send emails and ask about elimination/reducing trading fees.
More investors will inquire , more chances they will follow National Bank


----------

