investing
Exchanging funds in registered and non registered accounts
August 20, 2019

Based on the type of account you trade from (non-registered or registered), you may or may not need to manually place requests to exchange your funds when trading Canadian and U.S. securities. Click below to learn about the two account types.

  • Trading from a non-registered (margin) account

    One of the most popular account types is the non-registered margin account. This account offers many unique features that are not available in registered accounts, for example:
    • Buying on margin (borrowing funds from us to invest)
    • Bonds can have a face value dominations of $100 or $1000
    • Joint account ownership

    Let's use an example:

    Suppose you hold $8,000 CAD and $0 USD in your margin account and you decide to buy $2,500 of a U.S. stock. After making the purchase, your USD balance will be negative for the total cost of the trade ($2,500 USD + plus commissions), and your CAD balance will remain untouched at $8,000.

    While the buy order is settling (T+2), you can place a request to manually exchange CAD cash to cover the USD debt balance as this will not happen automatically in margin accounts. The 2-day settlement period that applies to every stock/ETF trade gives you the opportunity to cover your debt without being charged interest.

    If you don’t end up exchanging some of your CAD funds to cover the negative $2,500 USD within those 2 days, Questrade will begin charging you interest once the trade settles on the amount you’re borrowing from us ($2,500 USD) even though you may have $8,000 CAD available. For example, if CAD and USD were at par 1:1, once the exchange is completed your CAD balance would be at $5,500 CAD and 0 USD.

    If you are interested in borrowing the $2,500 USD so you can use your $8,000 CAD for other purchases, you don’t have to place an exchange request to cover the USD debit balance. However, keep in mind interest charges will apply to your account.

  • Trading from a registered account

    Registered accounts such as TFSA, RRSP, or RRIF offer many special tax benefits that are not available to margin account holders. At the same time, these accounts carry some restrictions. For example, one of the key differences between registered and non-registered accounts is that with registered accounts, you cannot borrow funds to invest and for that reason, the two account types are built differently.

    Let's use an example:

    Suppose you hold $12,000 CAD and $0 USD in your TFSA account and you decide to buy $2,500 of a U.S. stock. After making the purchase, your USD cash balance will be negative for the total cost of the trade ($2,500 + plus commissions), and your CAD balance will stay the same at $12,000 for the day of the trade.

    Since investors are not allowed to borrow money in registered accounts, Questrade will automatically convert the required amount of CAD cash to cover the negative USD balance of $2,500 at the end of the trading day, based on the market’s daily CAD:USD exchange rate. Questrade will take as much as we need from your $12,000 CAD to cover the purchase of $2,500 USD to bring your account balance to zero so you’re not borrowing money from us.

    For example, if CAD and USD were at par 1:1, once the exchange is completed, your CAD balance would be at $9,500CAD and 0 USD.

    At times, negative balances could also occur in registered accounts as result of inactivity fees, data fees or due to mandatory payments made from your registered account to you. Customers who carry a negative cash balance in their registered accounts will typically get a detailed email with a request to make a payment within a specific timeframe.

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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.