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Discount Brokerage Weekly Roundup – March 13, 2015

Discount Brokerage News

March 13, 2015

Published March 13, 2015 11:50 PM

Table Of Contents

    Key points

    It’s Friday the 13th. Tomorrow is Pi Day (3/14). As Jerry Seinfeld might irrationally proclaim, what is the deal with all these numbers? For DIY investors, however, keeping track of numbers is an integral part online investing.  And, with income tax filing deadlines around the corner, now is time of year that many folks will […]

    It’s Friday the 13th. Tomorrow is Pi Day (3/14). As Jerry Seinfeld might irrationally proclaim, what is the deal with all these numbers?

    For DIY investors, however, keeping track of numbers is an integral part online investing.  And, with income tax filing deadlines around the corner, now is time of year that many folks will be reviewing numbers – so long as Netflix isn’t on.

    In this week’s roundup, we start with an important message for Fraud Prevention Month regarding binary options.  Next we’ll take a look at some interesting numbers from the US brokerages that might add up to an interesting trend for brokerages here in Canada. Also, we’ll take a look at a recent ‘number themed’ promotion launched by one online brokerage in a very curious case of direct target marketing.  Upcoming investor education events will be next on the list and finally we’ll wind down with some interesting investor forum discussions.

    A Bad Option

    If you’ve ever tried to Google information on options trading, there’s no doubt that you’ve probably come across ads promoting binary options.  While binary options have evolved rapidly to look and feel like they’re legitimate trading alternatives, the disturbing truth is that they are, at best, gambling sites – many of which are unregulated, offshore companies simply out to separate internet users from their money.

    Thankfully, the Canadian Securities Administrators (CSA) issued an important bulletin warning Canadians of the murky world of binary options trading.  Although the bulletin named a large number of websites (37) as attempting to solicit Canadian investors, the list is far from exhaustive.

    The lines between investing online and gambling are certainly blurry when it comes to ‘trading/betting’ on short term moves in markets.  In fact, the controversy stirred up by Michael Lewis’ book Flash Boys (which happens to be celebrating its 1-year anniversary) highlights how even the biggest financial institutions and best and brightest minds in quantitative finance are exploiting microsecond advantages. What unregulated operators would do in jurisdictions that give them free reign usually spells trouble for an unsuspecting visitor.

    Barron’s Rates Interactive Brokers Best Online Brokerage

    When it comes online brokerage rankings, the only number that matters is number one.  Interactive Brokers (US), managed to land first once again in the 2015 ranking by Barron’s Magazine, narrowly beating out online brokerage firms OptionsHouse and TD Ameritrade.

    As with other rankings and ratings of online brokerages, it is important to understand how the rankings were devised and what components go into the evaluation.   Barron’s online brokerage ranking is one of the more thorough evaluations of brokerages in the US and, although this makes it of limited value for Canadian brokerages per se, it is interesting to see the features and trends available to US online investors (as well as those investors interested in using an online brokerage in the US).

    The following 8 categories were evaluated as part of the ranking:

    1. Trading Experience & Technology
    2. Usability
    3. Mobile
    4. Range of Offerings
    5. Research Amentities
    6. Portfolio Analysis & Reports
    7. Customer Service & Education
    8. Costs

    Among those categories, Interactive Brokers had the best showing by far when it came to costs.  While anecdotal, many Canadian DIY investors also state that when it comes to pricing Interactive Brokers is very difficult to beat especially for very active traders.  Active traders are particularly sensitive to cost and it is likely why Interactive Brokers is strategically pursuing this segment of the investor market (not to mention that active investors generate almost 10-fold the revenue of an average investor).

    For most DIY investors, cost per trade is and remains to be a major deciding factor when it comes a brokerage so it is interesting to see cost being given equal weight to other items when it comes to scoring.  As with all rankings, the priority that individuals place on the particular features as well as the overall experience ultimately determine the right fit.

    A Precise Promotion

    While some discount brokerages are looking to selectively target particular types of clients, a recent promotion launched by National Bank Direct Brokerage, takes things to a whole other level – 10 decimal places in fact.

    The latest promotion launched by National Bank Direct Brokerage targets engineers as well as engineering students and graduates with a 97.4874371859% discount (yes that’s how it is being marketed).

    Instead of paying $9.95 per trade, NBDB is offering 25 trades for $0.25 each for a 3 month period for deposits of $20,000 or more (for engineers and engineering graduates) and 10 trades for $0.25 for deposits of $5,000 or more (for engineering students).  The extremely precise discount offer is good until the end of May.

    On a side note, it is interesting that NBDB is looking specifically at this group for a special offer.  There is some anecdotal data regarding the kinds of occupations seen with DIY investors and engineers do tend to be more open to DIY investing.  Whether this particular promotion is connected to that data is speculative, however the precise demographic/occupational targeting may be something other online brokerages might be considering after seeing this kind of promotion.

    Change of Guard

    In an unrelated story, National Bank Direct Brokerage appears to be looking for a new President.  The outgoing President, Nancy Paquet, whom we interviewed late last year, has now taken on the role of VP Partnership with National Bank.  Interestingly according to the job posting, the new president of NBDB will also act as  VP for National Bank, splitting their time between the two roles.

    Strategically, bank-owned brokerages such as National Bank Direct Brokerage, are able to compete by being able to tap into the pool of clients from the banking side and vice versa.  The new President appears to have this as part of the mandate coming in.

    National Bank Direct Brokerage isn’t the only online brokerage that is seeing some change at the top.  Vancouver based Qtrade Financial Group saw its CEO Scott Gibner depart officially as of mid January.  Currently Qtrade Financial’s board co-chair Bill Packham is serving as interim CEO.

    Event Horizon

    Lots of learning options (about options) taking place this week.

    March 14 – Scotia iTRADE – Top Global Investment Themes for 2015 – Larry Berman Roadshow (Montreal, QC)

    March 15 – Scotia iTRADE – Trading with the Expert with Ziad Jasani 

    March 17 – Scotia iTRADE – Basic Option Income Strategies with Pro Market Advisors

    March 18 – TD Direct Investing – Introduction to Fundamental Analysis

    TD Direct Investing – Introduction to Investing in Options

    TD Direct Investing – Introduction to Weekly Options

    Scotia iTRADE – Equity Strategies Using ETFs with iShares

    March 19 – NBDB – Stop orders: A winning solution worth knowing – [Fr]

    Scotia iTRADE – The Power Of The Put Option with AJ Monte

    March 20 – Scotia iTRADE – Trading with the Expert with Ziad Jasani

    From the Forums

    A Superficial Situation

    As we move into ‘tax season’ there are all kinds of discussions about some of the tax implications associated with investing.  One of the popular (and important) topics is the superficial loss rule and what that means for investors.  This post from the Canadian Money Forum shows one investor’s experience in navigating through their options and the impact of a superficial loss. Also, here’s another helpful link explaining how this rule works.

    Urge to Merge

    Having only one discount brokerage account is a reality for some and a dream for others.  While there are various reasons individual investors open up (or end up with) multiple investment accounts, consolidating them means making a commitment to a particular online brokerage.  In this post from the Red Flag Deals investing forum, it was interesting to read the responses to one user’s questions about which brokerage to single out.

    That’s a wrap for this week’s roundup.  After a bit of a miserable week for those long markets, oil, the loonie, the weekend might offer a bit of a reprieve.  In keeping with our numbers theme, however, it was a pretty rough week for this groom who saw his wedding end because of a failed math question.   Of course nothing caps off a week like watching 14 silly kids just being. So here’s a more jovial send off.  Enjoy the weekend no matter what you’re counting!

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    Hi, Impact