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.
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?
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
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.
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.
I see, it means the longer I keep the stock, the higher interest
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.