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RBC Direct Investing margin rates

Your expert
Oskar G.
Fact checked by
Gyula L.
Updated
Jan 2024
Personally tested Personally tested
Data-driven Data-driven
Independent Independent

Are margin rates low at RBC Direct Investing as of January 2024?

Not exactly. Margin rates for trading stocks, ETFs and other assets are average at RBC Direct Investing.

Margin rates at RBC Direct Investing for different currencies in February 2024
Currency Margin rate value Margin rate class Industry average*
USD 9.8% Average 9.92%
GBP - - 6.97%
EUR - - 6.0%

*Calculated by comparing margin rates at more than 40 brokers reviewed by BrokerChooser. Data updated on January 4, 2024


My key findings in a nutshell
Oskar
Oskar Golebiowski

I've thoroughly tested RBC Direct Investing services with our analyst team by opening a real-money account and these are my most important findings:

  • To trade on margin at RBC Direct Investing, you will need to open a margin account.
  • RBC Direct Investing sets its own margin rate.
  • The margin rate at RBC Direct Investing is the interest you pay on funds borrowed from the broker.
  • Margin rates tend to move in tandem with interest rates set by central banks.
  • The longer you keep a margin position open, the higher your cost will be.
  • Margin rates vary depending on the currency and the borrowed amount.
  • Margin rates are also applied in short selling.

Brokerage service highlights at RBC Direct Investing

As a trader, you will need a reliable broker with low costs and an excellent service level if you are to successfully invest in the financial markets. Here are the most important characteristics of RBC Direct Investing’s services.

Key features of RBC Direct Investing services
💰 Deposit fee $0
💳 Deposit methods Bank transfer
💰 Withdrawal fee $0
💸 Account base currency USD, CAD
💸 Minimum deposit $0
🗺️ Country of regulation Canada
🎮 Demo account provided Yes
📋 Read more Check out the RBC Direct Investing review for 2024

Data updated on January 4, 2024

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What is the margin rate?

Margin rates, sometimes called debit rates, refer to the interest rates charged by brokerage firms when investors borrow money to buy and sell stocks, ETFs or options on margin. This is called trading on margin and it means that you will use both your own money and the funds borrowed from the broker to purchase securities.

Why is this good? Because it allows you to open larger positions by investing a larger amount - or as they say in brokerage lingo - by increasing your buying power.

The margin rate is the interest that the broker charges on borrowed funds.

Each brokerage sets its own margin rates. Some brokers will quote the margin rate as an annual percentage rate while others will display it in swap points. The rate can vary depending on several factors, the most important being the currency in which the funds are borrowed and the actual amount of the money you are lent.

Generally speaking, margin rates are closely tied to the benchmark interest rate of the currency in which you borrow. If your broker lends you USD, the margin rate will most often be the US interest rate plus a markup that the broker adds.

Given that the US Fed, the nation's monetary authority hiked interest rates to their highest level in more than 20 years in July 2023, traders are faced with a high margin rate environment.

It is customary among brokers to apply a tiered system for their margin rates, meaning that the rate depends on the amount you borrow: the more money the broker lends you, the lower the margin rate will be.

Certain brokers will apply different margin rates for different types of trading accounts. Typically, a standard account will have higher rates than a premium account. The rates used by BrokerChooser refer to standard accounts.

Most brokers will calculate the margin rate on a daily basis but the amount you owe them will be charged to your account once a month. Brokers are required to disclose their margin rates to investors.

Brokers are required to disclose their margin rates to investors. However, keep in my that margin rates can change rapidly without preliminray warning from your broker.

Margin rates on short selling

Margin rates can also apply when you engage in short selling. Short selling means that you borrow shares from your broker and sell them with the expectation that the share price will decline. You will then repurchase the shares at a lower price and pocket the difference as your profit.

The margin rate for short selling is the interest rate charged by the broker on the borrowed funds used to facilitate the short sale. It is similar to the margin rates for stock trading and option trading.

Trading on margin

If you want to trade on margin, you will need to let your broker know and you will also need to open a special trading account, often called a margin account. Once you have this account up and running, you will need to deposit a certain percentage of the total investment value as collateral, known as the margin requirement. The remaining portion is funded by the broker.

It’s highly recommended that you check the margin rates your broker applies, as higher rates can significantly impact your overall trading cost and potentially erode your investment gains. Additionally, you need to be aware of the risks associated with trading on margin, as losses can also be magnified in the same way that gains can be amplified.

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Author of this article

Oskar Golebiowski
Oskar Golebiowski

Oskar is a former Canadian broker expert for BrokerChooser. Oskar's goal is to bring transparency to investors in the Canadian stock brokerage market. With a bachelor’s degree in finance and over 3 years of business experience, Oskar has tested many different investing platforms in the past. His aim is to provide unbiased and honest reviews of the best tools available to Canadian investors.

Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology.

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