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Strategies & Market Trends : Underexposed Technical Analysis
AQN 5.865+0.4%3:59 PM EST
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To: Underexposed who wrote (419)8/15/2019 3:12:11 AM
From: Underexposed1 Recommendation

Recommended By
kimberley

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DIS: ETFs are not the same in Canada and the USA

Things are becoming clearer to me now and I can see some of the good and bad things about ETFs in Canada and the USA

I found another good article on ETFs in Investopedia

ETFs Characteristics for Short-Term Trading

Now as validity... it probably is quite good for USA ETFs but there are significant differences for Canadian ETFs that Canadians should be aware of.

Here are some points from this document
Other benefits include lower transaction charges for ETF trading, tax-efficient structures, and a variety of sectors/asset classes/focused investment schemes suitable to the needs of both traders and investors.
I contacted my TD Waterhouse discount brokerage and learned in Canada there was no difference in trading commissions at least with their brokerage. Whether you purchase a Canadian or American ETF the commissions would be the same as a normal stock of that country in the currency of that country.

The guy I talked to thought that eventually there may be a lowering of Canadian commissions but there was no sign of it yet.

I would never have an ETF outside of a TFSA or RRSP or RIF all of which are tax exempt... it saves a lot of hassles that way. I don't know the implications of tax free accounts in the USA...I will leave that for others to comment on

ETF units also trade off-exchange and such off-exchange trades are reported to the Trade Reporting Facility (TRF) .................... Traders should keep a close eye for the TRF reports and avoid ETFs that have a high percentage of off-exchange trades.
According to the guy I talked to, there is NO off-exchange trades done in Canada. I am glad of that personally. If you are trading in American ETFs and your instructions keep the orders (Buy/Sell) valid overnight... make sure your transaction are LIMIT so that you get the result you expect... If you use Market orders anything could happen overnight and you won't find out til the next day.


Personally I make all my orders Limit
Liquidity of underlying instruments: The liquidity of an ETF is directly correlated with the liquidity of the underlying instrument(s). An ETF like SPY ( SPDR ETF) on the S&P 500 Index can have high trading volume with high liquidity and price transparency because even the smallest component of the S&P 500 has very high liquidity.
This is very important when choosing an ETF.... when you want to buy/sell an ETF you want the transaction to happen in a reasonable time period

I did some research on 10 day average trading volumes and the startling difference is :

In USA markets about 200 ETFs of all types have 10 day average trading volumes OVER 1million shares/day with the highest being SPY @ 108 million shares/day


In Canadian markets only 31 ETFs of all types have 10 day average trading volumes OVER 100k shares/day consistently with the highest being HOU.TO @ 3.5 million shares/day

This means that out of about 800 Canadian ETFs only about 1/20 are really worth trading.

My personal lower limit for daily transactions/day for any stock is about 100k/day.

OK.... I shall be picking some ETF's that I think will do well in the next few days for both the USA and Canadian markets.

UPDATE

Our Canadian Stock pick , Canterra Gold [TSX:CG] bought at $10.88/share for 2000 = $21,760 is now worth $11.69/share = $23,380 or about a 7.5% gain in a couple of weeks. Gold still looks good to me so I have no intentions of selling it.

Our USA pick of Kinross Gold KGC was not successful in being purchased and the buy order ended on Aug 10... but it has now fallen near to what we had bid so I will be watching it closely to see if we should make another try at obtaining it.

UE
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