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Online trading

Who's the cheapest discount broker?

Last Updated: Feb. 8, 2012

Investors expect a lot from their online brokers - clean site design, efficient order execution, good research, understandable account summaries. But surveys suggest that low trading commissions top the list.

The good news is that competition in the sector is still broadening, putting downward pressure on commissions. The bad news is that commissions aren't dropping as fast as in the past and seem to be reaching a plateau.

The newest offering that's got active investors buzzing is Virtual Brokers. It has different commission structures ranging from a flat $6.49 per trade, plus exchange fees, to a recently added plan that costs a penny per share with a $1 minimum and a $10 cap. Traders who buy and sell high-value stocks several times in a day can save big because Virtual Brokers has a per-share structure where it applies its $5 minimum commission to an entire order ticket, or a day's worth of buys or sells.

On the other hand, CIBC Investor's Edge no longer offers a once-popular package where you could pre-buy 50 trades and get a per-ticket price as low as $6.95 for multiple purchases or sales of the same stock on the same day.

The cheapest option for direct access to global stock and futures markets is still Interactive Brokers, but it's not great for penny stocks or other high-volume trading, doesn't do RRSP or TFSA accounts, and has a $10 minimum monthly commission.

The difficulty with settling on an online broker (or two) is that pricing structures vary widely. Factors can include the number of shares traded, the price of the shares, how often you trade, the amount you have in your account, whether it's a market or a limit order, market data fees, exchange fees, annual fees for RRSP or TFSA accounts, and minimum commissions.

So in our interactive look at 14 brokers and how much they charge, we compare the annual cost of three different kinds of trading: Buying 100 shares of Royal Bank every three months, buying and selling 3,000 shares of Great Basin Gold every other week (52 trades/year), and buying and selling 50 units of the PowerShares Nasdaq-100 ETF five times a day (250 trading days/year). Only the second scenario assumes you have more than $50,000 in your account.

Of course, there's one thing that no online discount broker can provide at any price - advice. This is do-it-yourself territory.

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