investing
ECN fee guide
July 30, 2018

Have you ever been charged more than you would normally expect for trading Canadian listed securities? Use this guide to learn why this happens and how you can potentially reduce or avoid these extra fees.

In addition to paying standard commissions on your trades, you may at times be charged an Electronic Communication Networks (ECNs) or Alternative Trading Systems (ATSs) fee. ECNs and ATSs charge a service fee for matching buyers and sellers who trade on their exchange and networks. Rather than splitting standard trade commissions, ECN, and ATS fees into different categories, we combine and show them all as ‘commissions’.

As shown in the table below, these fees apply on a per-share basis and typically carry a very small charge. For example, if we place an order to buy/sell 460 shares of a Canadian listed security (trading above $1.00), the fee will only be $1.61 [$0.0035 (Fee) x 600 (# of shares) = $1.61].

Securities tradedAdding liquidityRemoving liquidity
Canadian securities $1.00 and above
TSX, TSX Venture, and all ATSsFree$0.0035/share
Canadian securities $0.99 and below
TSX, TSX Venture, and all ATSsFree$0.0008/share
CSEFree$0.0012/share
All U.S. Securities
MNGD, LAMPFreeFREE
INET (NSDQ)Free$0.003/share
ARCA, NYSE, EDGXFree$0.004/share
EDGA$0.004/shareFree

The good news is that ECN/ATS fees don’t necessarily apply on every trade. Let’s learn when they apply and how these fees can be avoided.

ECN fees are charged when placing a buy or sell orders that are considered to be “removing liquidity” or in other words when placing orders that will likely to be executed right away. This includes market orders, where the trader accepts the current best available price in the market when buying or selling shares or when placing marketable limit orders where investors specify a limit price that is either above the ask (when buying) or below the bid (when selling) typically causing the order to fill immediately.

On the other hand, when placing non-marketable limit orders where the limit price is lower than the Ask (when buying) or higher than the Bid (when selling), your order is likely to be longer in the queue waiting for somebody to agree to the price being offered. By doing that, you’re considered to be “adding liquidity” to the market, and therefore ECN/ATS will not apply in that scenario.

  • Let's use an example

    Let’s use an example to make it easier to understand. Suppose Stu, Jimmy, and Bob all want to buy 460 shares of stock ABC.TO.
    User-added image
     
    ActionPotential result
    Stu places a market order to buy 460 sharesThe order will fill immediately as he’s using a market order. Stu is considered to be ‘removing liquidity’, and will likely be charged ECN/ATS fees [$0.0035 (Fee) x 600 (# of shares) = $1.61]
    Jimmy places a marketable limit order to buy 460 shares at $17.54, three cents above the ask The order will fill immediately as he’s using a marketable limit order. Jimmy is considered to be removing liquidity as he’s willing to buy shares of ABC.TO for $17.54 per share when the market is offering to sell those shares for less at $17.51. Jimmy is considered Jimmy to be removing liquidity, and will likely be charged ECN/ATS fees [$0.0035 (Fee) x 600 (# of shares) = $1.61]
    Bob places a non-marketable limit orders to buy 460 shares at 17.36, while the Ask price is $17.51 (He’s willing to pay $15 cents less per share than the market is currently offering)Order will be pending in the queue until the Ask price drops to $17.36, therefore Bob is adding liquidity and will not typically be charged ECN/ATS fees

  • Important to know

    The order confirmation page will always disclose the maximum amount you potentially could be paying in ECN fees; however, quite often the amount charged is much lower than shown. You can find out how much you were charged once the order is executed by editing the columns under the executions tab to display ECN fees.

    The U.S. Securities and Exchange Commission (SEC) collects a fee on some U.S. listed trades. Most U.S. trades are not affected by SEC fees. If you’re charged, the fee is calculated at $0.0000231 x (Value of the trade). For example, if you’re selling 100 shares of a U.S. stock at $25 (100 x $25 = $2,500 - value of the trade) will incur an SEC fee of $0.06 USD (0.0000231 X $2,500). You can view these fees on your IQ trading platform by editing the columns under the executions tab to display SEC fees.  

    What else can be considered to be removing liquidity?

    • Buy and cover orders where the limit price is equal to or greater than the ask price
    • Sell and short orders where the limit price is equal to or less than the bid price
    • Executed stop orders
    • Executed stop-limit orders where the limit order is immediately executable
    • Any order with special restrictions, such as AON (all or none)
    • Any order executed in the pre- or after-market
    • Trades executed at market open or market close

You may want to check this out

Need more help?

The information contained in this website is for information purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied is made by Questrade, Inc., its affiliates or any other person to its accuracy.

Questrade Wealth Management Inc. (QWM) and Questrade, Inc. are wholly owned subsidiaries of Questrade Financial Group Inc. Questrade, Inc. is a registered investment dealer, a member of the Investment Industry Regulatory Organization of Canada (IIROC) and a member of the Canadian Investor Protection Fund (CIPF), the benefits of which are limited to the activities undertaken by Questrade, Inc. QWM is not a member of IIROC or the CIPF.