How to Buy TSX Stocks

By Kirsteen Mackay

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The Toronto Stock Exchange (TSX) primarily features innovative small-cap and micro-cap stocks. There are over 3,400 companies listed on TSX and TSXV.

Would you like to know how to buy TSX Stocks? Here’s everything you need to know. The Toronto Stock Exchange (TSX) is the primary equity market in Canada and has a 170-year history.

What is the TSX?

The Toronto Stock Exchange (TSX) hosts senior growth-oriented companies with strong performance track records. It features Canada’s largest banks, Canadian oil and gas companies and a large percentage of the world’s public mining companies.

The TSX is a leading global exchange providing issuers with integrity, liquidity, and opportunity. 

Companies list on the TSX for the following reasons:

  • To gain market exposure

  • Access capital and future financing opportunities

  • Increase their visibility

  • Create employee incentives

  • Facilitate growth

  • Provide liquidity for shareholders

The TSX attracts fewer stock speculators in relation to institutional investors than the NASDAQ. More stability and less volatility give investors peace of mind.

TMX Group owns the TSX and the TSX Venture Exchange (TSXV). The TSXV permits small companies to go public, and many of these go on to become members of the TSX.

Can a US-Resident Investor trade on the TSX?

Yes, US residents can trade Canadian-listed securities on the TSX.

Some US brokers permit clients to open an international account. These allow clients to trade directly on a foreign stock exchange such as the TSX. This type of account usually incurs a premium commission fee.

Can International Investors Trade on the TSX?

Yes, international investors can and do trade on the TSX.

Natural resources lie at the heart of Canadian industry, and its mining sector is vast. This makes Canada an attractive country to international investors, particularly as the green transition takes hold.

It is estimated that around 40% of all trading on TSX and TSXV originates outside Canada.

A Shareholder Friendly Jurisdiction

Canada is a peaceful country where business is encouraged. The political and business arena welcomes investors. The Canadian banking system is reliable and established, and stock market activity is encouraged.

TSX Industries

The TSX and TSXV welcome businesses from various industries, including the following sectors.

  • Energy: comprised of Oil & Gas, Energy Services, and Utilities & Pipeline companies.

  • Mining: 43% of the world’s public mining companies are listed on TSX and TSXV.

  • Technology: The TSX and TSXV welcome international high-growth companies. TSX technology issuers must have a market cap exceeding $50m and a minimum of $10m cash in the treasury before listing.

  • Life Sciences: The TSX and TSXV list leading public Life Sciences companies from Canada and worldwide. 

  • Clean Technology: comprised of companies operating in the development of green technologies and sustainable infrastructure solutions.

  • Diversified Industries: such as communications, media, consumer, industrial, financial, and real estate products and services.

How to Purchase TSX Stocks

If you would like to purchase shares in a TSX-listed company, here are the steps to follow:

Choose Your Broker

Most TSX-listed stocks are available to trade via:

  • CIBC World Markets Inc.

  • TD Securities Inc.

  • Merrill Lynch Canada Ltd.

  • National Bank Financial Inc.

  • Morgan Stanley Canada Ltd.

  • RBC Capital Markets

  • Goldman Sachs Canada Inc.

  • BMO Nesbitt Burns Inc.

  • Citadel Securities Canada

  • Scotia Capital Inc.

Most major Canadian dealers are connected to the TSX. You can also buy TSX stocks online via an online brokerage account such as Questrade, Wealthsimple Trade, or a Robo-advisor. Additional platforms may be available to trade TSX-listed securities. If in doubt, ask your broker. 

You can contact the TSX directly for more information on trading Canadian securities abroad if you are an international investor.

Fix Your Budget

A TSX or TSXV investment may be risky, and you shouldn’t invest what you can’t afford to lose. Treat any small-cap or micro-cap investment as a speculative outlay. Size your position carefully in a diversified portfolio.

Fund your account

Check if your broker will allow you to trade the TSX stock you are interested in. Then you can fund your account.

Fees and Bid/Ask Spread

Buying shares often encounter charges. Make yourself aware of any transaction fees you will incur.

In illiquid stocks, the spread between the bid and ask on a share is significantly wider. Check the spread because, in an illiquid stock, you may lose money trying to sell if you need to get out of the trade.

Ask for help

Executing the TSX trade may differ slightly from broker to broker. Depending on liquidity, buying a TSX stock sometimes requires help. Your broker’s customer service desk should be able to help you. 

Buy your TSX stock

Now you’re ready to buy shares; you can opt for market or limit orders when you place the trade.

What are the TSX Trading Times?

The typical TSX and TSXV trading sessions run on weekdays from 9:30 am to 4 pm Eastern Time. Trading is closed on weekends and stock market holidays. 

The TMX Group

The TMX Group Limited (TMX) is a large organization with several branches. TMX owns and operates the Toronto Stock Exchange (TSX) along with the TSX Venture Exchange, the Montreal Exchange, the TSX Alpha Exchange, and the Boston Options Exchange (BOX).

Principal subsidiaries of the TMX Group include the Canadian Depositary for Securities (CDS), the TSX Trust, TMX Atrium, Shorcan Brokers and Shorcan Energy Brokers.

The TMX Group operates cash and derivative markets for multiple asset classes, including equities, fixed income, and energy. It also provides investors with real-time and historical data services via TMX Datalinx.

Meanwhile, TSX Private Markets encourages efficient capital raising and secondary trading within Canada's exempt market. This TMX Group division provides enhanced access to capital for private and public issuers and the exempt market liquidity for approved dealers and their accredited investors.

TMX Group Ltd. operates cash and derivative markets for multiple asset classes, including equities, fixed income and energy. The firm provides clearing facilities, data products and other services to the international financial community. It operates through four segments: Capital Formation; Equities and Fixed Income Trading and Clearing; Derivatives Trading and Clearing; and Global Solutions, Insights and Analytics.

TMX Group was founded on April 28, 2011, and is headquartered in Toronto, Canada. It operates offices across Canada, London, Beijing, and Sydney. It is also present in key US markets.

TSX Venture Exchange

The TSX Venture Exchange is known as the TSXV. This stock exchange allows small companies to go public in Canada. The TSXV currently features nearly 1700 companies. 

Over 700 companies that started as Venture Exchange companies graduated to become TSX-listed companies after that. And 20% of the senior index for Canada comprises companies that began as junior TSXV companies.

Essentially the TSXV allows these smaller players to conduct their Series B, C and D financing rounds on a public market rather than in the private space.

This differs from Forge Global or OTC because the TSXV is still a regulated public market. It provides investor confidence with regulatory rules, disclosure, and oversight. 

The average financing size on TSXV in 2019 was $3.5m.

The TSXV stock exchange is based in Calgary, Alberta, Canada and was initially called the Canadian Venture Exchange.

The TSX Alpha Exchange

The TSX Alpha Exchange was launched in 2015 to address inefficiencies in the market.

The exchange introduced minimum order sizes for brokers, a speed bump and prevented poorly priced orders from executing before better-priced limit orders.

The speed bump was introduced as the exchange faced competition from the arrival of the Aequitas NEO exchange. NEO had designed its speed bump to protect long-term investors from predatory trading practices. This came as Michael Lewis’s book ‘Flash Boys’ highlighted the unfair practices of high-frequency trading.

The TSX Alpha speed bump features a randomized order processing delay of between 1 and 3 milliseconds. Its arrival received a mixed response.

TSX Member Firms

The three sister exchanges, TSX, TSXV and TSX Alpha, feature more than 110 participating Organizations, Members and Subscribers that advise clients, underwriting new issues, provide corporate finance services, and assist companies interested in becoming publicly traded.

The TSX vs. the CSE

The primary Canadian competitor of the Toronto Stock Exchange (TSX) is the Canadian Securities Exchange (CSE).

The CSE was initially established to make it easier for small-cap companies to access the capital markets. Therefore, the CSE offers businesses a simpler route to market than the TSX.

In particular, the CSE’s streamlined regulatory system makes the process quicker than the TSX or TSXV.

Read our How to Buy CSE Stocks article for further details.

Investing in TSX Stocks

Most TSX issuers have a market cap above $50m. It features senior companies with a strong trading track record.

Pros and Cons of Investing in TSX Stocks

Pros of TSX investing

  • Access to buying shares in blue-chip Canadian companies

  • Stocks traded on the TSX can be purchased in tax-shielded accounts and are RRSP and TFSA eligible.

  • The TSX is a well-managed reputable exchange with stringent regulatory oversight.

Cons of TSX investing 

  • The Canadian capital markets are less diverse than US markets and have fewer companies to choose from.

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In this article:

Topics:
Investing
Industries:
Financials

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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