# Questrade to offer commission free ETF trades



## Echo (Apr 1, 2011)

It looks like Questrade will offer commission-free ETF trades (buying, not selling) starting February 1st.

https://community.questrade.com/b/theiqblog/archive/2013/01/30/buy-etfs-for-free-happy-february.aspx

A bit of fine print:

1. You’ll pay the ETF commission at the time of purchase, but they’ll rebate you in two business days
2. There are no minimum number of shares you have to buy. Hold them for as long as you’d like
3. Buying ETFs for free is only available if you’re trading on one of the Questrade IQ platforms 
4. ECN fees or any other incidentals charged by the markets are your responsibility
5. Your standard commissions will apply when you sell an ETF

I'm not a Questrade customer so I'm not sure what the IQ platform is (assuming it's for online trades, not for calling in?). Regardless, this is a pretty big move from Questrade.


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## andrewf (Mar 1, 2010)

IQweb is their 'entry level' web trading platform.

This is good news. Another nail in the MF coffin...


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## Barwelle (Feb 23, 2011)

Wow that's cool. It's all ETFs, not just a specific list of specialized or sector specific ETFs that a couch potato wouldn't use.

That'll make currency conversion cheaper through Norbert's Gambit cheaper too.

Now my question is... how to they make their buck on investors that only hold ETFs? They are a business, after all. Do they get kickbacks from the ETFs?


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## humble_pie (Jun 7, 2009)

barwelle u are too smart for your own good each:

they must be getting some incentive from the etf product vendors. Enough to subsidize their transaction costs at least. Cannot be very much money, perhaps 1 or 2 $.

it makes sense to me that the etf vendors would be embarked on a competitive battle to gain clients, so they'd pay something to attract new clients.


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## andrewf (Mar 1, 2010)

1) Any uninvested cash balances
2) Forex fees (many investors are not adventurous enough to do Norbert)


But I suppose passive clients don't cost them much.


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## Echo (Apr 1, 2011)

Yes, it sounds like the funds pay them in some cases (plus they still get the commission when you sell). I'm trying to reach them for story I'm working on so I'll be sure to ask - although I think I know what they'll say


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## andrewf (Mar 1, 2010)

HP, that would make sense if this were a limited list. What incentive does an ETF provider have to cough up if Questrade is offering free purchases on _all_ ETFs?

How does this affect ACB calculations? Should the buy commissions be included or not?


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## humble_pie (Jun 7, 2009)

Echo said:


> Yes, it sounds like the funds pay them in some cases (plus they still get the commission when you sell). I'm trying to reach them for story I'm working on so I'll be sure to ask - although I think I know what they'll say


hey echo love to see your story covering what they say, i'll look for it ...

i can see where brokers would accept a token payment from an etf provider to cover their hard costs in processing a client's buy order. 

i'd assume that, in general, the etf product vendors are competing aggressively to attract new clients, as more & more people drop out of traditional mutual funds. I'd assume the etf vendors know that, once won over, new etf investors are likely to be around for a very long time, so it's worth paying a little bit to acquire them in the first place.


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## james4beach (Nov 15, 2012)

Yeah from what I recall, there's still way more money in mutual funds than ETFs. When you consider that mutual funds are basically now obsoleted by ETFs, there's so much potential business for ETF vendors so maybe their push now is to hook people. The ETF guys also now also do actively managed funds and funds-of-funds. So they even do mutual funds better than the original mutual funds!

I've made use of the some of the commission free ETFs at iTrade. I frequently buy small amounts of XUT, so commission-free is perfect.


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## Jungle (Feb 17, 2010)

This is great news, thanks for posting. 
Too bad I closed my Questrade account. Their service is not that great, but for free etf and 4.95 trade, you are not really paying a lot. 
At one point, their trading platform would not even work on my computer, very, very buggy. 


I am surprised this is ALL etfs... usually it's the crappy ones. Hmm..


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## liquidfinance (Jan 28, 2011)

I like the sound of this. Perfect when to reinvest smaller dividend payments if I have no other cash to supplement bigger transactions.


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## humble_pie (Jun 7, 2009)

i just posted a message about kickbacks to canadian brokers from the 11 different US options exchanges. It's been going on for years & the SEC does try to keep it under control ... but recently it seems to me that US kickbacks for option order flow have popped back up into prominence.

hmmmn what i'm sniffing is that the roar of competition for investors, esp all these shiny new first-time DIY investors, is steadily getting louder & louder.

questrade won't be the only broker dropping the buyside commish. Fellow rabble of the forum, unite. Let us approach our brokers & agitate, agitate, agitate.


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## Barwelle (Feb 23, 2011)

humble_pie said:


> barwelle u are too smart for your own good each:


I do what I can!

I guess they still make some money off your ETF purchase, because some day you will sell it. But say you invest only in canadian-listed etfs (no currency exchange), and only rebalance with new money (no commission from selling when rebalancing) and are holding your investments for a really long time... Questrade would be losing money from such investors! 

Then, with no commission to buy, there is no disincentive to make small, frequent contributions, so I am sure the number of trades placed will go up.

There's gotta be some kind of kickback. Or this is some kind of teaser that they will remove after a while... but they haven't called it a limited-time offer, or even hinted at a timeframe. 

I'm not really sure why they would still make you pay the commission if they will rebate it two days later... I'm sure they could set it up so that the system recognizes that it's a commission-free trade. Oh well, minor detail.

This will look bad for the brokerages out there charging $20-30/trade!


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## doctrine (Sep 30, 2011)

> Now my question is... how to they make their buck on investors that only hold ETFs? They are a business, after all. Do they get kickbacks from the ETFs?


They do make money. They make money when you sell the ETF - the normal commission charge applies. 



> 5. Your standard commissions will apply when you sell an ETF


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## lonewolf (Jun 12, 2012)

If the middleman makes to much money he will be bypassed & the exchange or perhaps another exchange will be started where the traders pay a small fee to become members then the members trade commision free. Perhaps the owners of the companies will pay the fee if you buy thier stock. It would not surprise @ some point in the future the gravy train ends for the middleman.

Iam not sure if it is available in Canada yet but in the states I remenber reading you dont have to go to the bank to borrow money to buy stocks on margin but can go to the market & anyone can lend out the money for the stocks being bought on margin. The banks hate it because it is cutting into thier game & I dont think many are offering this service but there is some way to get around it & trade that market. Yorba radio interviewed a guy a while back that explained how to do it.


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## Barwelle (Feb 23, 2011)

doctrine said:


> They do make money. They make money when you sell the ETF - the normal commission charge applies.


Yes, but with say a young investor who is using the couch potato strategy, they could potentially go decades without selling an ETF, or at least rarely selling. This person would make far more buy trades than sell trades.


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## CanadianCapitalist (Mar 31, 2009)

When Scotia first launched a list of commission-free ETFs, I was told that it was subsidized by the ETF companies (Claymore, iShares and Horizons) whose funds were on that list. I suspect that's the case with Questrade. It might just be a loss leader to get investors through the door. Even if you always buy, buy, buy, there is still money to be made off the cash balance, forex conversions, trailer fees etc.


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## Jungle (Feb 17, 2010)

Problem is they could stop offering free trades at anytime. So really don't count on it with a small portfolio. 

Also be prepared for their lack of service and mistakes. Bring _a lot_ of patience.


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## Uranium101 (Nov 18, 2011)

I wonder who will pay for buying NYSE:VOO with mere 0.05% MER.


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## Eclectic12 (Oct 20, 2010)

andrewf said:


> ... How does this affect ACB calculations? Should the buy commissions be included or not?


The commissions paid should be included ... since Qtrade is rebating the commission and states they are (i.e. CRA will know), I don't see how one could include the buy commission.

Except for the rebate part, this is similar to a DRiP, is it not? There will be a commission to include on the sell but the rebate results in no commission on the buy.


Cheers


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## andrewf (Mar 1, 2010)

It'd be nice if Questrade clarified that. I guess they don't want to stick their neck out.


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## Echo (Apr 1, 2011)

I've asked them about ACB and here's their response:

"the commission will be rebated and should not be included in the ACB. Traders can deduct the rebated commission amount from the initial purchase price (that includes the commission)."


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