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NormR
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Interactive Brokers

 

I haven't tried any of the other non-bank discount brokers. But I do have accounts at BMO, TD, and ScotiaItrade. The executions at the big banks are very poor. I don't know if a $200k account would notice but it is night and day versus interactive brokers.

 

The other big advantage for Canadian investors is that ForEx is done at wholesale rates. At other brokers, you are going to lose 2-3% on a round-trip trade for U.S. stocks.

 

I wouldn't recommend margin on a $200k account but if they do use it, the margin rates at the big banks are horrible.

 

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The main drawback, especially for a small account is that IBKR charges for market data. I just use my BMO account for market data and trade in IB. But this wouldn't work for your example.

 

The user interface takes some time to get used to. But it is actually pretty good.

 

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For larger accounts (over $1M) you might feel safer at the big banks. But smaller accounts at the smaller brokers should have sufficient insurance.

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I'll second KCL that there really isn't anything in Canada anywhere close to IB and I've tried a lot of them.

 

The downsides of IB are market data fees and minimum account fees though I think some bank brokers are putting in minimum fees these days. The downside of other brokers are higher fees. Bank brokers will give you some free research if that's your thing.

 

Another option is Questrade. They're an independent broker. They're fees are pretty low and no minimums. They charge 2% for FX but if you do a transaction of any size - maybe like 10k or more - you can call into their FX desk and get a better rate. Their execution and platform is just as bad as the bank brokers.

 

I have all margin accounts and larger/more important registered accounts at IB and lower value/lower trading registered accounts (where I don't have to do as much) at Questrade.

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The other big advantage for Canadian investors is that ForEx is done at wholesale rates. At other brokers, you are going to lose 2-3% on a round-trip trade for U.S. stocks.

 

Cool.  Btw, investors can get around the FX issue with a little cross-border arbitrage.  i.e. buying RY on the TSX (in CAD) and quickly selling it on the NYSE (in USD).

 

The main drawback, especially for a small account is that IBKR charges for market data. I just use my BMO account for market data and trade in IB. But this wouldn't work for your example.

 

Interesting, so you don't need to buy the data if you can get it elsewhere.  I notice they have a minimum # of trades fee too but it's waived for accounts with more than ~$100k.  Are there other similar charges that one should be aware of? 

 

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Yes you can get around the FX with cross border arbitrage but it's a pain in the ass cause you have to get your broker to rejournalize the shares. The USD and CAD shares of the same company have different CUSIPs so they technically are not the same shares. There's also US dollar ETFs. They also involve rejournaling but the ETFs are kinda designed for that so it won't piss off your broker as much.

 

About IB, there are no other fees than the $10 a month minimum that gets waved when you have more than 100k USD. The only other one is a 12.50 a quarter for registered accounts.

 

I also forgot to mention that IB also has a bunch of really cool APIs that enable you to do a lot of stuff like create a custom platform or use it with excel. So if you have a separate data feed you can feed that into excel do all your in excel and execute your trades from excel. Pretty cool stuff.

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Yes you can get around the FX with cross border arbitrage but it's a pain in the ass cause you have to get your broker to rejournalize the shares. The USD and CAD shares of the same company have different CUSIPs so they technically are not the same shares. There's also US dollar ETFs. They also involve rejournaling but the ETFs are kinda designed for that so it won't piss off your broker as much.

 

So, for the benefit of a broader readership who may not be aware, the colloquial term for cross border FX arbitrage is a "Norbert's Gambit, the details of which can be read here: http://www.finiki.org/wiki/Norbert%27s_gambit

 

I would agree that it's a minor pain in the ass because you need to buy an interlisted stock on one exchange and immediately sell it on the other exchange, but, it's not too bad with RBC Direct Investing because they auto-journal offsetting positions withing the same account (c-a-d., if you have a short position in a security in the Canadian side of your account and a long position in the US side of your account, they offset the positions by automatically journalling shares across your account).  So, in essence, a currency exchange may be conducted through two simple trades at a cost of $10 each.  If you are trying to convert $50k, the effective cost is 4 bps, which is trivial.

 

 

About IB, there are no other fees than the $10 a month minimum that gets waved when you have more than 100k USD. The only other one is a 12.50 a quarter for registered accounts.

 

The waiving of fees is pretty common for all brokers in Canada if you maintain a certain, modest balance.  Usually it's about Cdn$25k to have the maintenance fee waived.

 

 

I also forgot to mention that IB also has a bunch of really cool APIs that enable you to do a lot of stuff like create a custom platform or use it with excel. So if you have a separate data feed you can feed that into excel do all your in excel and execute your trades from excel. Pretty cool stuff.

 

There's not much cool about RBCDI.  It's a basic, crappy trading platform with a website that looks like it was developed by a 15 year-old in his mother's basement.  But, it gets the job done.

 

 

A few considerations about IB vs RBCDI:

 

1) Data is free with RBCDI, but you don't get Level II quotes.  This doesn't much matter if you are trading a high volume issue like a major bank or some other really high volume security, but if you plan to invest in some smaller-caps or low volume equities then level 2 is quite helpful to understand market depth.

 

2) Trades at RBCDI are $10, and in most cases the fee is lower at IB.  If you are a very active trader, this can become significant, but if you subscribe to Buffet's 20 ticket punch card theory and you make few trades per year then it doesn't really matter.

 

3) Margin debt at RBCDI (and the other major brokerages) is not competitively priced.  My rough recollection is that it's about 4.25% right now, which is ridiculous for secured debt.  If you chronically use margin, this can become a big deal quickly.  On the other hand, most Canadians who want to use leveraged investing would at least consider using the Smith Manœuvre to get a better rate and to completely avoid the risk of margin calls.

 

4)  Moving money back and forth from your chequing account to your investment account is a snap with the big banks.  I've never tried it with IB, but I'm guessing that it would take a couple of days to transfer funds.

 

5) RBCDI does not give you on line access to any market other than Canada and the US.  If you want to buy securities in a European or Japanese company, you're pretty much stuck with NYSE listings or ABDs.  Not a big deal for me, but some guys like to invest in obscure markets, which is probably easier to do with IB.

 

6) RBCDI gives you access to a very narrow range of bonds on-line.  Good luck trying to buy notes from KO or WMT.  Sometimes the distressed debt market is the best place to exploit a market over-reaction and for this, IB is probably much better.

 

7) All of the big Canadian banks are too big to fail.  Your money is likely safer in them compared to IB.  There's not a chance in hell that the Government of Canada would allow BMO Investorline or RBCDI to go broke because it would likely cause a spill-over into Canada's retail banking space (ie, if RBCDI went broke and it made the headlines, what customer wouldn't rush to withdraw all of his money from RBC?).  The CIPF provides some minimal protection to investors, but the too big to fail protection is probably better.

 

 

Anyway, just a few thoughts.

 

SJ

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2) Trades at RBCDI are $10, and in most cases the fee is lower at IB.  If you are a very active trader, this can become significant, but if you subscribe to Buffet's 20 ticket punch card theory and you make few trades per year then it doesn't really matter.

 

For trades of any size, the cost of poor executions at big Canadian Banks will swamp the trading commission. I just tried a trade at TDW yesterday. The cost of market impact (versus the price I would have gotten at IB) was at least $150 versus the $10 commission.

 

Re: Norbert's Gambit. This is usually better than retail FX. But I have had cases where stocks moved against me before I could finish the second leg of the arbitrage. I think one time I lost $1000 on this arbitrage. I know that some people use a money market fund for this arbitrage but it isn't available at BMO. The other issue is settlement. Not a big issue in margin accounts. But I have been hit with big interest charges in registered accounts when attempting Norbert's Gambit. And of course Norbert's Gambit doesn't help with dividends. There are many CAD companies that pay USD dividends. And you have to pay commissions and worry about spreads and market impact. Better to just go to a broker that offers reasonable ForEx.

 

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I didn't mention the global platform b/c I assumed it wasn't relevant for smaller accounts. But if you are planning to invest outside NA, IB is the only viable option.

 

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Re: Too Big Too Fail. IB is very conservatively capitalized so I don't know that it is really less safe than Big Banks. One concern would be if IB let it's Canadian subsidiary fail. But if you have multi-million dollar accounts you are probably best to divide it amongst several insured brokerages anyway.

 

Disclosure: I still have most of my assets at BMO/TD/Scotia but my experience with IB has been so good that I plan to transfer more assets over to IB. I also own IBKR shares.

 

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For trades of any size, the cost of poor executions at big Canadian Banks will swamp the trading commission. I just tried a trade at TDW yesterday. The cost of market impact (versus the price I would have gotten at IB) was at least $150 versus the $10 commission.

 

Re: Norbert's Gambit. This is usually better than retail FX. But I have had cases where stocks moved against me before I could finish the second leg of the arbitrage. I think one time I lost $1000 on this arbitrage. I know that some people use a money market fund for this arbitrage but it isn't available at BMO. The other issue is settlement. Not a big issue in margin accounts. But I have been hit with big interest charges in registered accounts when attempting Norbert's Gambit. And of course Norbert's Gambit doesn't help with dividends. There are many CAD companies that pay USD dividends. And you have to pay commissions and worry about spreads and market impact. Better to just go to a broker that offers reasonable ForEx.

 

 

Now, this is something that I don't quite get (you're not the first person to complain about order execution).  People who fuss about order execution are normally folks who are trying to time the market (day traders are the extreme example).  For the rest of us who are not trying to time the market or day-trade, it really should make no difference whether our order is executed at 09:55 or 10:01 in the morning.  On average, the price movement over those 6 minutes will be zero, and you have an approximately equal likelihood of experiencing a favourable or unfavourable price movement due to slow execution.  Am I missing something here?  Is this just a real life application of loss aversion theory where people acutely feel the pain of the occurrences of "bad luck" on order execution and gloss over the instances of "good luck"? Or is there something else that I have not grasped?

 

Same thing for conducting a Norbert's Gambit.  For a retail investor it's impossible to simultaneously buy and sell in two different markets because it takes 3 or 4 minutes to fill out the on-line order form.  So, for those 3, 4 or 5 minutes, you are exposed to market fluctuations.  But, the average price fluctuation over <5 minutes is zero, with small favourable movements being roughly offset by small unfavourable movements.  If you lost $1,000 while conducting a Norbert's Gambit you were either playing with really big dollars, you got really unlucky (ie, the flash crash happened to hit in the 4 or 5 minutes between your two trades), or you were doing something very wrong.  A price movement of 0.25% for a liquid stock would be a huge move over 5 minutes, and to lose $1,000 you'd need to be converting $400,000....but even if you were converting $400,000 a cost of $1,020 (the commission plus the loss) would still be a really good FX charge...

 

 

SJ

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Now, this is something that I don't quite get (you're not the first person to complain about order execution).  People who fuss about order execution are normally folks who are trying to time the market (day traders are the extreme example).  For the rest of us who are not trying to time the market or day-trade, it really should make no difference whether our order is executed at 09:55 or 10:01 in the morning. 

 

The complaint isn't about how long it takes an order to get filled (though the big banks are very slow). It is the price that it gets filled at. It probably doesn't matter if you are buying 100 or 200 shares. But if you are trying to buy slightly larger positions, it becomes a big issue.

 

I don't use market orders but here is a hypothetical example:

 

Place a market buy order on IB. You might execute at the mid-point between bid-ask.

Place a market buy order on TD. You might execute at $0.05 above the ask.

 

Most investors don't notice this invisible cost.

 

The practical result is that for larger orders, you need to think a lot more about execution risk on the Big Bank platforms. My limited experience with IBKR is that execution is night and day. Granted, my experience so far on IBKR is limited mostly to illiquid call options with large spreads. But with BMO, execution was so poor and commissions were so high that the trades weren't practical. Same trade on IBKR was delightful. In fact, the whole reason that I opened the IB account was just to do this options trade. But after seeing the quality of the executions, I plan to move over a big chunk of my stock portfolio.

 

Same thing for conducting a Norbert's Gambit.  For a retail investor it's impossible to simultaneously buy and sell in two different markets because it takes 3 or 4 minutes to fill out the on-line order form.  So, for those 3, 4 or 5 minutes, you are exposed to market fluctuations.  But, the average price fluctuation over <5 minutes is zero, with small favourable movements being roughly offset by small unfavourable movements.  If you lost $1,000 while conducting a Norbert's Gambit you were either playing with really big dollars, you got really unlucky (ie, the flash crash happened to hit in the 4 or 5 minutes between your two trades), or you were doing something very wrong.  A price movement of 0.25% for a liquid stock would be a huge move over 5 minutes, and to lose $1,000 you'd need to be converting $400,000....but even if you were converting $400,000 a cost of $1,020 (the commission plus the loss) would still be a really good FX charge...

 

This is theoretically correct. And if you are willing to risk a market order, it might be even be practically correct (though you need to factor in spreads and execution cost). But if you use limit orders, there is an asymmetry. If the stock moves in your favour, your order will get executed. But if the stock moves away from you, then you can get big losses. And then you have a dilemma. Do you take a big loss on your clever arbitrage? Or hope the stock moves back in your favour? And while you ponder this dilemma, the stock continues to move against you. That's how you end up with a $1000 loss.

 

The irony is that this is a concern if you are using a broker that has poor executions. The same trade on IB probably wouldn't have gotten away from me. But I don't need to worry about this hassle on IB since it offers fair ForEx.

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The complaint isn't about how long it takes an order to get filled (though the big banks are very slow). It is the price that it gets filled at. It probably doesn't matter if you are buying 100 or 200 shares. But if you are trying to buy slightly larger positions, it becomes a big issue.

 

I don't use market orders but here is a hypothetical example:

 

Place a market buy order on IB. You might execute at the mid-point between bid-ask.

Place a market buy order on TD. You might execute at $0.05 above the ask.

 

Most investors don't notice this invisible cost.

 

The practical result is that for larger orders, you need to think a lot more about execution risk on the Big Bank platforms. My limited experience with IBKR is that execution is night and day. Granted, my experience so far on IBKR is limited mostly to illiquid call options with large spreads. But with BMO, execution was so poor and commissions were so high that the trades weren't practical. Same trade on IBKR was delightful. In fact, the whole reason that I opened the IB account was just to do this options trade. But after seeing the quality of the executions, I plan to move over a big chunk of my stock portfolio.

 

 

Unless one of the firms is the market maker, you shouldn't see a different execution price.  If the firm that you are dealing with happens to be the market maker, then you can sometimes get screwed by a few cents.

 

For an illiquid trade, If you look at Level II quotes to get a sense of market depth, you should have a fair idea of how how your trade will execute (ie, for a large trade you'll definitely end up with an outcome that is worse than the basic bid-ask spread.  But, you should know this in advance if you've looked at the Level II quotes.  And that's one area where RBCDI particularly sucks, because it does not provide Level II quotes.

 

Options are an interesting beast.  That's another area where IB probably has a large advantage because options commissions with the big banks have a per contract fee (ie, $XX per trade + $Y/contract).  Those commissions add up pretty quickly when you trade 20 or 30 contracts or more.

 

 

 

This is theoretically correct. And if you are willing to risk a market order, it might be even be practically correct (though you need to factor in spreads and execution cost). But if you use limit orders, there is an asymmetry. If the stock moves in your favour, your order will get executed. But if the stock moves away from you, then you can get big losses. And then you have a dilemma. Do you take a big loss on your clever arbitrage? Or hope the stock moves back in your favour? And while you ponder this dilemma, the stock continues to move against you. That's how you end up with a $1000 loss.

 

The irony is that this is a concern if you are using a broker that has poor executions. The same trade on IB probably wouldn't have gotten away from me. But I don't need to worry about this hassle on IB since it offers fair ForEx.

 

Okay, so I would say that you are definitely doing something wrong.  If you want to do a Norbert's Gambit, you need to pick a very liquid interlisted security.  Choose one that isn't reporting earnings that day, doesn't go X-D that day, and isn't involved in some sort of large merger/acquisition/corporate control process.  RBC, TD, CM, BAM or something like that will work, but some people prefer to use DLR.  They are highly liquid on both the TSX and the NYSE, so don't bother screwing around with limit orders, just use a plain vanilla market order because there's plenty of market depth and the bid-ask spreads are usually very small.  You will definitely be exposed to movements in the market for the 4 or 5 minutes between your buy and sell trades, but a liquid stock usually will only move a couple of pennies in 5 minutes (favourable or unfavourable).  You will get a "fair" exchange rate, plus or minus the couple of pennies and minus the $20 of commissions.  If you are exchanging $20k or $30k, your net cost of conversion should almost always be less than 20bps, and if you are moving $50k or $100k it's even lower.  I haven't looked at IB's spread on FX, but I'd be surprised if it were lower than what you can achieve with an NG.

 

 

SJ

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Unless one of the firms is the market maker, you shouldn't see a different execution price.  If the firm that you are dealing with happens to be the market maker, then you can sometimes get screwed by a few cents.

 

This is not my experience. IB has very advanced algorithms that route orders to get the best price. Banks seem to auction off retail order flow to highest bidder. TD, in particular, gives me horrible executions. People just don't notice these poor executions because there is no way to do a controlled experiment.

 

Okay, so I would say that you are definitely doing something wrong.

 

In my case, I was limited in which inter-listed stocks I could use (for tax reasons had to avoid ones already in my portfolio including the 4 you listed). So I used Potash. Potash is very liquid but more volatile. Using a market order would limit the risk I described but exposes you to flash crash risk. I don't trust current market structure and think market orders are reckless. Best compromise would be a looser limit order. But I'd rather just use IB.

 

I haven't looked at IB's spread on FX, but I'd be surprised if it were lower than what you can achieve with an NG.

 

IB doesn't charge a spread. They give you wholesale rates and charge a small commission ($2 in most cases). Spread I am seeing is 1.25580/1.25586. I don't think you can come close to that with the Gambit. But regardless, the hassle of the Gambit wouldn't be worthwhile at IB.

 

Edit: Commission is $2 USD

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Maybe I am not doing this right but when I have done Norberts Gambit you have to wait for the trade to close before you can move it and sell on the other currency side.  There is generally a 2-3 day delay.

 

With BMO, you can create a short on one side and a long on the other side. They clean everything up automatically a few days after settlement. This works fine in my margin account. But has caused issues (interest charges) in registered accounts.

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Maybe I am not doing this right but when I have done Norberts Gambit you have to wait for the trade to close before you can move it and sell on the other currency side.  There is generally a 2-3 day delay.

Basically yes, you have to wait 3 days for the initial trade to settle. Otherwise what you're doing is effectively naked shorting on the second trade. However I do know that you can get away with it at certain bank brokers. Not because it's ok, but because their systems are so bad that they don't pick up on it.

 

By the way, doing this in a registered account is double bad since you'd also be breaking a shitload of statutes.

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Maybe I am not doing this right but when I have done Norberts Gambit you have to wait for the trade to close before you can move it and sell on the other currency side.  There is generally a 2-3 day delay.

Basically yes, you have to wait 3 days for the initial trade to settle. Otherwise what you're doing is effectively naked shorting on the second trade. However I do know that you can get away with it at certain bank brokers. Not because it's ok, but because their systems are so bad that they don't pick up on it.

 

By the way, doing this in a registered account is double bad since you'd also be breaking a shitload of statutes.

 

 

I do it with my RRSP all the time.  You buy in one market and then sell in the other, and your net position is zero.  T+3 comes along, and RBCDI journals it out on settlement day.  I've never received any static from RBCDI or the federal government.

 

 

SJ

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Yea just because RBC has shitty systems doesn't mean that it's ok. Your unsettled buy trade and subsequent RBC journalling don't matter. When you're executing your sell trade you do not have the securities you're selling there's no ifs or buts. Whenever you execute a sell trade you have a naked short for 3 days. Bad in a margin, double bad in a registered.

 

Behind the scenes RBC is probably lending you some shares from some omnibus account to balance things out, covers its ears, sings lalala and pretends it doesn't know anything.

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RBC, TD, CM, BAM or something like that will work, but some people prefer to use DLR.  They are highly liquid on both the TSX and the NYSE, so don't bother screwing around with limit orders, just use a plain vanilla market order because there's plenty of market depth and the bid-ask spreads are usually very small.  You will definitely be exposed to movements in the market for the 4 or 5 minutes between your buy and sell trades, but a liquid stock usually will only move a couple of pennies in 5 minutes (favourable or unfavourable).  You will get a "fair" exchange rate, plus or minus the couple of pennies and minus the $20 of commissions.  If you are exchanging $20k or $30k, your net cost of conversion should almost always be less than 20bps, and if you are moving $50k or $100k it's even lower.  I haven't looked at IB's spread on FX, but I'd be surprised if it were lower than what you can achieve with an NG.

 

SJ

See if you trade with IB you actually can send trades simultaneously and get them executed at the same time. But as KCL said it's a moot point because at IB you can get good FX and don't need to bother with this nonsense.

 

By the way. Do not send in market orders. A market order is just an invitation for someone to fuck with your trade. HFT boys love that. Once you send in a market order your market will dissapear if just for a split second, just long enough for you to get a shitty execution. You should always use limit orders, or if at IB they have some algos that look and feel like a market order but they're not.

 

Honestly I don't even know what we're doing here, debating crappy brokers with crappy services and best ways to execute "gambits" pushed upon us by the aforementioned crappy service. Just get yourself a big boy broker that offers good services and know what their doing and you won't have to worry about that stuff again.

 

Btw, for those that are worried about broker failure, as others have mentioned IB is conservatively financed, carries the standard CIPF protection and on top of it has extra insurance from Lloyds that guarantees accounts up to 3 million I believe.

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Btw, for those that are worried about broker failure, as others have mentioned IB is conservatively financed, carries the standard CIPF protection and on top of it has extra insurance from Lloyds that guarantees accounts up to 3 million I believe.

 

It seems to me this is the biggest thing to consider.  For that reason, I would go with one of the big banks.  Just figure out which one is the least crappy.

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It seems to me this is the biggest thing to consider.  For that reason, I would go with one of the big banks.  Just figure out which one is the least crappy.

 

CIPF covers losses up to $1M. So you don't need to worry about this unless you have at least $1M.

 

Edit to add:

 

I wasn't aware of the Lloyd's insurance at IB:

https://www.interactivebrokers.ca/en/accounts/accountsProtection.php?ib_entity=ca

 

Very nice.

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It seems to me this is the biggest thing to consider.  For that reason, I would go with one of the big banks.  Just figure out which one is the least crappy.

 

CIPF covers losses up to $1M. So you don't need to worry about this unless you have at least $1M.

 

Edit to add:

 

I wasn't aware of the Lloyd's insurance at IB:

https://www.interactivebrokers.ca/en/accounts/accountsProtection.php?ib_entity=ca

 

Very nice.

 

 

CIPF is okay, but have you looked at their financials?  I did actually look at them a few years back and my recollection is that their reserves were pretty modest.  It's not like CDIC or CMHC which are ultimately backstopped by the federal government.

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RBC, TD, CM, BAM or something like that will work, but some people prefer to use DLR.  They are highly liquid on both the TSX and the NYSE, so don't bother screwing around with limit orders, just use a plain vanilla market order because there's plenty of market depth and the bid-ask spreads are usually very small.  You will definitely be exposed to movements in the market for the 4 or 5 minutes between your buy and sell trades, but a liquid stock usually will only move a couple of pennies in 5 minutes (favourable or unfavourable).  You will get a "fair" exchange rate, plus or minus the couple of pennies and minus the $20 of commissions.  If you are exchanging $20k or $30k, your net cost of conversion should almost always be less than 20bps, and if you are moving $50k or $100k it's even lower.  I haven't looked at IB's spread on FX, but I'd be surprised if it were lower than what you can achieve with an NG.

 

SJ

See if you trade with IB you actually can send trades simultaneously and get them executed at the same time. But as KCL said it's a moot point because at IB you can get good FX and don't need to bother with this nonsense.

 

By the way. Do not send in market orders. A market order is just an invitation for someone to fuck with your trade. HFT boys love that. Once you send in a market order your market will dissapear if just for a split second, just long enough for you to get a shitty execution. You should always use limit orders, or if at IB they have some algos that look and feel like a market order but they're not.

 

Honestly I don't even know what we're doing here, debating crappy brokers with crappy services and best ways to execute "gambits" pushed upon us by the aforementioned crappy service. Just get yourself a big boy broker that offers good services and know what their doing and you won't have to worry about that stuff again.

 

Btw, for those that are worried about broker failure, as others have mentioned IB is conservatively financed, carries the standard CIPF protection and on top of it has extra insurance from Lloyds that guarantees accounts up to 3 million I believe.

 

 

Thanks for the advice, but I won't hesitate to use a market order on WFC, BAC, RY, or CM.  They have that enormous bid-ask spread of 1 cent.  If I get screwed, it might be for $20 on a $100k trade, and I can tough that one out.

 

I have no problem with the notion that there are benefits to "big-boy brokers" but you probably won't see me recommending a big-boy broker to most people who have $200k of assets (see original post).  For small accounts like that, the big-boy benefits are modest and somewhat counterbalanced by integration of brokerage accounts with retail banking services.

 

One size does not fit all, and this discussion is really about the relative merits of a broker for somebody with modest assets.

 

Cheers.

 

SJ

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Yea just because RBC has shitty systems doesn't mean that it's ok. Your unsettled buy trade and subsequent RBC journalling don't matter. When you're executing your sell trade you do not have the securities you're selling there's no ifs or buts. Whenever you execute a sell trade you have a naked short for 3 days. Bad in a margin, double bad in a registered.

 

Behind the scenes RBC is probably lending you some shares from some omnibus account to balance things out, covers its ears, sings lalala and pretends it doesn't know anything.

 

 

Are you a fed or something?  Department of Finance maybe?

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CIPF is okay, but have you looked at their financials?  I did actually look at them a few years back and my recollection is that their reserves were pretty modest.  It's not like CDIC or CMHC which are ultimately backstopped by the federal government.

Actually the CIPF is in pretty good shape. It has about half a billion in reserves. Maybe that does not sound like a big number but it's significant when you consider the actual payouts. In the past 10 years it had to pay out about 15 million for 4 broker failures. Since inception in 1969 it paid out about 69 million for 21 broker failures. In this light I think that 1/2 a billion is quite adequate.

 

The truth is that broker failures just aren't that expensive. It's really only client cash that's at risk in a failure and in some extreme cases some stuff around securities lending.

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Yea just because RBC has shitty systems doesn't mean that it's ok. Your unsettled buy trade and subsequent RBC journalling don't matter. When you're executing your sell trade you do not have the securities you're selling there's no ifs or buts. Whenever you execute a sell trade you have a naked short for 3 days. Bad in a margin, double bad in a registered.

 

Behind the scenes RBC is probably lending you some shares from some omnibus account to balance things out, covers its ears, sings lalala and pretends it doesn't know anything.

Are you a fed or something?  Department of Finance maybe?

Nope, I'm not a fed, nor do I work for Finance or National Revenue if that's what you're worried about. I'm just a guy who has a good understanding of how markets work and what happens behind your screen. I figured I'd share that information since it may be beneficial to some people that would come across this thread. I'm sure some people that try to do the gambit don't realize all the thing that are going on behind the scenes and I'm sure some of them may not be very comfortable doing naked shorts in their RRSP.

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