Comments on: E*Trade Quietly Offers Limited Wash Trades

By: Canadian Capitalist

Canadian Capitalist — Fri, 23 May 2008 19:57:56 +0000

Robert: Darn right that it is a cash cow. A 1% foreign exchange commission each way on a $10K trade works out to $200, far more than even the most expensive discount broker commission.

Fortunately, there are some options however imperfect they may be. I moved from RBC Direct to TD Waterhouse just for this reason and if more investors vote with their feet and demand a change, the brokers will fall in line before you can say “currency conversion charge”.

By: Robert H.

Robert H. — Fri, 23 May 2008 15:52:27 +0000

I looked into the legal aspect of holding US$ in your RRSP and found that holding foreign currancy in your RRSP is considered a qualified investment under cdn tax rules, and thus legal. At one point in time the IDA by-laws penalized brokers for holding US cash in RRSP accounts but this was never enforced and struck from the by-laws in 2006 by all proviences. However the borkers and banks have not complied with the law and actually lie to customers saying that customer’s can’t hold US$ in there RRSPs under the law [totally false statement]. In fact the law is the opposite, but as one writer stated, it is a cash cow by forceing customers to convert to Cdn$ after closing out a position and charging 4 to 10 basis points on the value of the trade. The only way to enforce the law would be a class action suite.

By: Jon D.

Jon D. — Fri, 23 May 2008 00:11:02 +0000

Just for reference, the way a Questrade RSP account works for U.S.$ trades is the U.S. dollars sit as a “position” and overnight the trade either adds or subtracts from this “position”. No calling or specifying source. At least that’s how it works for me.

By: Gene

Gene — Thu, 22 May 2008 16:48:07 +0000

Hi everyone, I’m GK. Wash rates/trades are asset limited at E*Trade. I was told by one customer service rep there was a requirement (I think it was $25,000 in assets at E*Trade, but I could be wrong on that).

Also, I wouldn’t switch to E*Trade just for this, but like CC said in one of his comments, if you’re already there, why not call and ask? I was talking to a registered trader at E*Trade, and he asked me to call the following morning to arrange the wash. He then did a quick calculation, and said, “You’ll save $700 for that one phone call.” We laughed and agreed it was worth it. I made the call.

All things considered, were I to switch from another broker that didn’t offer wash rates/trading, I would go with TD. They don’t require that phone call to arrange the wash, as long as the trades are made on the same day.

Again, hopefully all brokers will eventually allow us to settle trades in USD, and wash rates/trading will be a thing of the past.

By: Canadian Capitalist

Canadian Capitalist — Thu, 22 May 2008 14:27:40 +0000

Mike: Oh. Okay. I misunderstood your comment. TD Waterhouse has offered wash trading for years but it’s kept it kind of quiet. I think GK might be right that wash trading at E*Trade is offered to anyone with $25K in assets. For existing clients, it wouldn’t hurt to call them and ask and painlessly save a bundle.

By: Four Pillars

Four Pillars — Thu, 22 May 2008 14:15:31 +0000

CC – I didn’t “time” – just that the offer was limited.

It seems to me that both Questrade and TD made a bit of a splash with their wash trades functionality. Maybe it was just in blogworld?

By: Canadian Capitalist

Canadian Capitalist — Thu, 22 May 2008 11:56:00 +0000

Mike: I’ll call E*Trade and ask if it is a limited time offer. I don’t think it is. The other two that offer wash trades – TD Waterhouse & Qtrade – keep it quiet as well.

Robillard: No, we aren’t talking about anything illegal here

By: Robillard

Robillard — Thu, 22 May 2008 05:21:58 +0000

Wash trading can also refer to a situation in which a trader uses a discretionary or institutional account to trade with his own personal account or a related account. For example, a discretionary managed account broker trading securities from a client’s account to fill his own personal orders. This form of wash trading is illegal.

By: Four Pillars

Four Pillars — Thu, 22 May 2008 03:34:23 +0000

This sounds like a very quiet “limited offer” kind of deal.

Not something I would rely on.