A constant irritant of mine is the high cost of converting between U.S. and Canadian dollars at my discount brokerage. Canadian Capitalist has a good way to reduce these currency-conversion costs, but it involves several steps. I wish that my discount brokerage would offer a more sensible option.
When I trade stocks or ETFs, I have to contend with commissions and spreads. Most people understand commissions, but spreads are less familiar. Consider the ETF XIU. As I write this, it is trading at a bid price of $17.51 and an ask price of $17.52. This means that the price per unit is different by one cent depending on whether I'm buying or selling. For $100,000 worth of XIU, this difference is $57. Each time I make a trade, I lose half of this spread, or about $28.50. Add in the trading commission of $10, and the cost to me is $38.50.
Things are very different when buying or selling U.S. dollars. If I don't do anything special to avoid high costs, the spread at my discount brokerage on large amounts is 1%. This means that if the Canadian and U.S. dollars were at par with each other, I'd have to pay C$100,500 to buy US$100,000 but would only get C$99,500 if I sold US$100,000. There is no explicit commission, but the spread costs me $500 on each conversion! Compare this to only $38.50 when trading the same dollar amount of XIU.
Something much more sensible for converting between Canadian and U.S. dollars would be a much lower spread and an explicit commission. With a $10 commission and a spread of say 0.05%, the cost of converting $100,000 would be only $35, which is much more reasonable. For $10,000, the cost would be $12.50. I may not have chosen exactly the right commission and spread amounts, but this model of an explicit commission plus a greatly reduced spread much more fairly reflects a brokerage's costs of performing currency conversions.