Questrade - What happens if I buy U.S. stock with Canadian money?
I personally spoke with a Questrade agent about my question. To make a long story short: in a margin account, you are automatically issued a loan when buying U.S. stock with a Canadian money. Whereas, in a registered account (e.g. RRSP), the amount is converted on your behalf to cover the debit balance. Me: What happens if I open an account and I place an order for U.S. stocks   with Canadian money? Is the amount converted at the time of transfer?   How does that work? Agent: In a margin account, you are automatically issued a loan   for a currency you do not have, however, if you have enough buying   power, it will go through. The interest on the overnight balance is   calculated daily and is charged on a monthly basis. We do not convert   funds automatically in a margin account because you can have a debit   cash balance. Agent: In a registered account, the Canada Revenue Agency does not allow a debit   balance and therefore, we must convert your funds on your behalf   to cover the debit balance if possible. We convert automatically   overnight for a registered account. Agent: For example, if you buy U.S. equity you will need USD to buy it,   and if you only have CAD, we will loan you USD to cover for that   transaction. For example, if you had only $100 CAD and then wanted to   buy U.S. stock worth $100 USD, then we will loan you $100 USD to   purchase the stock. In a margin account we will not convert the funds   automatically. Therefore, you will remain to have a $100 CAD credit and   a $100 USD debit balance (or a loan) in your account. Me: I see, it means the longer I keep the stock, the higher interest   will be? Agent: Well, yes, however, in a registered account there will be not   be any interest since we convert your funds, but in a margin account, there will   be interest until the debit balance is covered, or you can manually   convert your funds by contacting us. The reason it's not automatic is that Questrade doesn't want to force you to convert in margin accounts at the time of buying the stock. What if you bought a US stock today and the exchange rate happened to be very unfavorable (due to whatever), wouldn't you rather wait a few days to exchange the funds rather than lose on conversion right away? In my opinion, Questrade is doing you a favor by letting you convert at your own convenience. I don't believe from reading the responses above that Questrade is doing anything 'original' or 'different' much less 'bad'. In RRSPs you are not allowed to go into debt. So the costs of all trades must be covered.  If there is not enough USD to pay the bill then enough CAD is converted to do so.  What else would anyone expect? How margin accounts work depends on whether the broker sets up different accounts for different currencies. Some do, some don't.  The whole point of using 'margin' is to buy securities when you don't have the cash to cover the cost.  The result is a 'short' position in the cash.  Short positions accrue interest expense which is added to the balance once a month.  Every broker does this. If you buy a US stock in a USD account without the cash to cover it, you will end up with USD margin debt.  If you buy US stock in an account that co-mingles both USD and CAD assets and cash, then there will be options during the trade asking if you want to settle in USD or CAD.  If you settle in CAD then obviously the broker will convert the necessary CAD funds to pay for it.  If you settle in US funds, but there is no USD cash in the account, then again, you have created a short position in USD.
"You can hold a wide variety of investments in your TFSA account, including stocks such as SLF. But if the stocks are being purchased via a company stock purchase plan, they are typically deposited in a regular margin account with a brokerage firm (a few companies may issue physical stock certificates but that is very rare these days). That account would not be a TFSA but you can perform what's called an ""in-kind"" transfer to move them into a TFSA that you open with either the same brokerage firm, or a different one. There will be a fee for the transfer - check with the brokerage that currently holds the stock to find out how costly that will be. Assuming the stock gained in value while you held it outside the TFSA, this transfer will result in capital gains tax that you'll have to pay when you file your taxes for the year in which the transfer occurs. The tax would be calculated by taking the value at time of transfer, minus the purchase price (or the market value at time of purchase, if your plan allowed you to buy it at a discounted price; the discounted amount will be automatically taxed by your employer). 50% of the capital gain is added to your annual income when calculating taxes owed.  Normally when you sell a stock that has lost value, you can actually get a ""capital loss"" deduction that is used to offset gains that you made in other stocks, or redeemed against capital gains tax paid in previous years, or carried forward to apply against gains in future years. However, if the stock decreased in value and you transfer it, you are not eligible to claim a capital loss. I'm not sure why you said ""TFSA for a family member"", as you cannot directly contribute to someone else's TFSA account. You can give them a gift of money or stocks, which they can deposit in their TFSA account, but that involves that extra step of gifting, and the money/stocks become their property to do with as they please. Now that I've (hopefully) answered all your questions, let me offer you some advice, as someone who also participates in an employee stock purchase plan. Holding stock in the company that you work for is a bad idea. The reason is simple: if something terrible happens to the company, their stock will plummet and at the same time they may be forced to lay off many employees. So just at the time when you lose your job and might want to sell your stock, suddenly the value of your stocks has gone way down! So you really should sell your company shares at least once a year, and then use that money to invest in your TFSA account. You also don't want to put all your eggs in one basket - you should be spreading your investment among many companies, or better yet, buy index mutual funds or ETFs which hold all the companies in a certain index. There's lots of good info about index investing available at Canadian Couch Potato. The types of investments recommended there are all possible to purchase inside a TFSA account, to shelter the growth from being taxed. EDIT: Here is an article from MoneySense that talks about transferring stocks into a TFSA. It also mentions the importance of having a diversified portfolio!" "I think you have to go back to [this HBR article](https://hbr.org/2014/09/profits-without-prosperity) to really understand:  TLDR: Buybacks boost CEO pay and hurt the long term value of companies. But I'm not convinced that they're ""the root of inequality""   ""Consider the 449 companies in the S&amp;P 500 index that were publicly listed from 2003 through 2012. During that period those companies used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37% of their earnings. That left very little for investments in productive capabilities or higher incomes for employees.""  ""Why are such massive resources being devoted to stock repurchases? Corporate executives give several reasons, which I will discuss later. But none of them has close to the explanatory power of this simple truth: Stock-based instruments make up the majority of their pay, and in the short term buybacks drive up stock prices. ""  ""Trillions of dollars that could have been spent on innovation and job creation in the U.S. economy over the past three decades have instead been used to buy back shares for what is effectively stock-price manipulation.""  "" Most are now done on the open market, and my research shows that they often come at the expense of investment in productive capabilities and, consequently, aren’t great for long-term shareholders.""  ""Research by the Academic-Industry Research Network, a nonprofit I cofounded and lead, shows that companies that do buybacks never resell the shares at higher prices.""  ""Many academics have warned that if U.S. companies don’t start investing much more in research and manufacturing capabilities, they cannot expect to remain competitive in a range of advanced technology industries. ""  Specific examples:  ""Pharmaceutical drugs.  In response to complaints that U.S. drug prices are at least twice those in any other country, Pfizer and other U.S. pharmaceutical companies have argued that the profits from these high prices—enabled by a generous intellectual-property regime and lax price regulation—permit more R&amp;D to be done in the United States than elsewhere. Yet from 2003 through 2012, Pfizer funneled an amount equal to 71% of its profits into buybacks, and an amount equal to 75% of its profits into dividends. In other words, it spent more on buybacks and dividends than it earned and tapped its capital reserves to help fund them. The reality is, Americans pay high drug prices so that major pharmaceutical companies can boost their stock prices and pad executive pay.""  ""Nanotechnology.  Intel executives have long lobbied the U.S. government to increase spending on nanotechnology research. In 2005, Intel’s then-CEO, Craig R. Barrett, argued that “it will take a massive, coordinated U.S. research effort involving academia, industry, and state and federal governments to ensure that America continues to be the world leader in information technology.” Yet from 2001, when the U.S. government launched the National Nanotechnology Initiative (NNI), through 2013 Intel’s expenditures on buybacks were almost four times the total NNI budget.""" You probably bought the cross listed WestJet stock.  If you wanted to buy shares on the TSE, I'd suspect you'd have to find a way to open a brokerage account within Canada and then you'd be able to buy the shares.  However, this could get complicated to some extent as there could be requirements of Canadian tax stuff like a Social Insurance Number that may require some paperwork.  In addition, you'd have to review tax law of both countries to determine how to appropriately report to each country your income as there are various rules around that. TD Waterhouse would be the Canadian subsidiary of TD Ameritrade though I haven't tried to create a Canadian brokerage account. "I recommend avoiding trading directly in commodities futures and options.  If you're not prepared to learn a lot about how futures markets and trading works, it will be an experience fraught with pitfalls and lost money – and I am speaking from experience. Looking at stock-exchange listed products is a reasonable approach for an individual investor desiring added diversification for their portfolio.  Still, exercise caution and know what you're buying. It's easy to access many commodity-based exchange-traded funds (ETFs) on North American stock exchanges.  If you already have low-cost access to U.S. markets, consider this option – but be mindful of currency conversion costs, etc. Yet, there is also a European-based company, ETF Securities, headquartered in Jersey, Channel Islands, which offers many exchange-traded funds on European exchanges such as London and Frankfurt.  ETF Securities started in 2003 by first offering a gold commodity exchange-traded fund. I also found the following: London Stock Exchange: Frequently Asked Questions about ETCs.  The LSE ETC FAQ specifically mentions ""ETF Securities"" by name, and addresses questions such as how/where they are regulated, what happens to investments if ""ETF Securities"" were to go bankrupt, etc. I hope this helps, but please, do your own due diligence." Assuming a USA taxable account: Withdrawing funds from a brokerage account has nothing to do with taxes. Taxes are owed on the profit when you sell a stock, no matter what you do with the funds. Taxes are owed on any dividends the stock produces, no matter what you do with the dividend. The brokerage sends you a form 1099 each year that shows the amounts of dividends and profits. You have to figure out the taxes from that. Depending on what state you live in in the United States, your Canadian brokerage may be able to sell products within the existing RRSP.  I have an RRSP in Canada through TD Waterhouse and they infact just sent me a recent letter explaining that they are permitted to service my Canadian RRSP under the laws of Tennessee (where I live).  The note went on to specifically state that they are not subject to the broker-dealer regulations of the US or the securities/regulations laws on the TN securities act.  Furthermore, they state that Canadian RRSPs are not regulated under the securities laws of the US and the securities offered and sold to Canadian plans are exempt from registration with the SEC.  When I call TD to do trades, I just ask for a Canada/US broker and that's who enters the sale for me.  I declare my RRSP annually both to IRS under RRSP treaty and through FBAR reporting. It depends primarily on how the Canadian economy is designed i.e export oriented or import oriented. If you look at this, it shows more or less equal amount of exports and imports. For the specific case of Canada, the exports would become costlier, because of a costlier dollar, but at the same time imports would become cheaper. This is only a generalization, not specific goodswise, which would require a more detailed ananlysis. But investors have a different dilemma. Canadian investors would find  it cheaper to invest abroad so may channel their investments abroad because they may find it costlier to invest in Canada. While foreign investors would find it costlier to invest in Canada and may wait for later or invest somehwre else.  Then government may try to boost up investment and start lowering the interest rates, if it sees the rising dollar as detrimental for the Canadian economy and investments flowing abroad instead of Canada. But what would be the final outcome of the whole rigmarole is little difficult to predict, because something is arriving and something is departing and above all goverment is doing something or is going to do. But the basic gist is Canadian exporters will be sad and Canadian importers will be happy, but vice versa for foreign investors intending to invest in Canada. "@sdg's answer is spot-on with the advice to avoid repeated conversions, but I'd like to provide some specifics on the fees involved: Each time you round-trip Canadian dollars (CAD) through a U.S.-dollar (USD) priced security at TD Waterhouse and leave your proceeds in CAD, you're paying a total foreign exchange fee – implied in their rate  spread – of about 3%, give or take. That's ~3% per buy & sell combination, or ~1.5% on each end. You can imagine if you trade back & forth frequently, you can quickly lose a lot of money.  Do it back and forth ten times in a year and you're out ~30% on the fees alone! The TD U.S. Money Market Fund (TDB166) that TD Waterhouse is referring to has no direct commission to buy or sell, but it does have a Management Expense Ratio (MER) of 0.20% per year – basically a fee which is deducted from the fund's returns (which, today, are also close to zero.)  Practically speaking, that's a very slim fee to hold some USD in your Canadian dollar TFSA. While 0.20% is cheap, a point to keep in mind is if you maintain a significant USD balance, you are maintaining currency risk:  You can lose money in CAD terms if the CAD appreciates vs. USD. Additional references: Canadian Capitalist describes TD Waterhouse and the use of TDB166 and ""wash trades"" at How to ""Wash"" Your Trade?  He's referring to RRSPs, but the same applies to TFSAs, which came out after the post was written. Canadian Couch Potato has two relevant articles: Are US-listed ETFs Really Cheaper? and Lowering Your Currency Exchange Fees."