Lesson Currency conversion
Understand how currency settlement works in your registered accounts.
Before Questrade introduced the option to choose how currency was settled, no other institution in the industry allowed investors to hold U.S. cash in a registered account. Cash was always in Canadian dollars, meaning any trade in the U.S. markets would trigger a currency conversion.
One of the great features of Questrade’s registered accounts, including RRSPs and TFSAs, is being able to hold both U.S. and Canadian dollars. This means you can trade in markets on both sides of the border without paying currency conversion each time you trade.
The currency settlement preference lets you control how money is deposited (settled) in your registered account when you sell securities, receive cash, and when you transfer funds from another financial institution.
With this feature, you can set your account preference to Currency of transaction, USD or CAD settlement. No more surprise currency conversions means more savings for you.
This is the simplest option. If you invest in U.S. markets, your currency will remain in U.S. dollars. If you invest in Canadian markets, your currency will remain in CAD.
Invest in both? Great, your currency will always settle in the currency of the trade.
For example, assume you sold XYZ stocks and received $500 USD. You also sold DEF.TO stocks and received $800 CAD. As there is no currency settlement in the account, your cash balance the following business day would be USD $500 and CAD $800.
The exception to this rule is if you hold a debit balance on one side of the currency overnight.
For example, if you have $500 USD cash and have -$100 CAD, your USD cash will be converted to cover the debit balance on the CAD side. This auto conversion is based on the CRA rule which does not allow registered accounts to hold debit (negative) balances.
If your currency settlement preference is set to CAD, any funds deposited into your account will be converted to CAD automatically overnight. If you received USD from the proceeds of selling US stocks, dividends or any USD cash will be converted to CAD overnight.
For example, assume you sold XYZ stocks and received $1,000 USD. This amount would be converted to the equivalent amount in CAD overnight using the end-of-day exchange rate on the market. The following business day, you will hold CAD Cash and $0 in USD.
If your currency settlement preference is set to USD, any funds deposited in your account will automatically be converted to USD overnight. If you received CAD from the proceeds of selling CAD stocks, dividends or any CAD cash will be converted to USD overnight.
For example, assume you sold XYZ.TO (Canadian) stocks and received $2,000 CAD from the sale. The proceeds would be converted to the equivalent USD overnight using the end-of-day exchange rate on the market. The following business day, you will hold the equivalent USD amount (adjusted for spread).
To update your currency settlement preference, log in to your Questrade account, click ACCOUNT MANAGEMENT then Currency settlement to make changes.
Please note that you cannot exchange funds in a Questwealth Portfolios account. Also, Registered accounts cannot hold a negative balance in either CAD or USD, so auto conversions may apply.
Registered accounts are reviewed at 4 pm ET for negative cash balances. For example: If your registered account is negative $500 USD at 4 pm ET we will automatically buy $500 USD to ensure your account does not have a negative balance the following day. Trades placed after hours between 4 pm ET and 8 pm ET that lead to a negative balance will be reviewed the following business day at 4 pm. Conversions may apply if the account has a negative CAD or USD balance at that time. Please note that if you try to cover your debit balances by liquidating positions or any other means between 4-8 pm ET, you may have surplus cash in your account the following morning as the registered account review and conversion will still take place the next day.
Approved FX requests placed before 2:30 pm ET will be processed approximately between 3:30 pm ET to 4:30 PM ET the same day. Requests placed after 2:30 pm ET will be processed on a best effort basis the same day or processed the next business day. You can cancel a request by going to the Request History tab in your account.
Note:The information in this blog is for educational 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.
