The first iteration of the band was formed in 1968, in Toronto, when Carole Pope (vocals, guitars) and Kevan Staples (keyboards, guitars) began performing in a folk group known as "O". Their musical partner in this venture was Clive Smith. In 1970, Smith left the group, and Pope and Staples changed their name to "The Bullwhip Brothers", performing as a largely acoustic duo at Toronto art festivals and at private events.
In 1973, the band was renamed Rough Trade, and was joined by percussionist Chris Faulkner, bassist Bob Jennings, and drummer Donny McDougal. As would happen frequently going forward, the players supporting Pope and Staples were subject to sometimes wholesale change, and by 1974, the Pope/Staples duo was joined by Hap Roderman, Jane Cessine, Sharon Smith and Marv Kanarek. The band, through their theatrical combination of rock, R&B and raw sexuality (Pope often performed in bondage attire), became a popular draw on Toronto's live music scene through their regular shows at Grossman's Tavern, in Toronto.
Rough Trade was the first rock band to record a direct to disc album with 1976's Rough Trade Live, which despite the title, was actually a studio recording. Each side was performed live (without an audience) all the way through, and cut directly to the mastering disc for greater audio fidelity. By this time, the band's line-up was Pope, Staples, JoAnn Brooks (vocals, percussion), Rick Gratton (drums), Michael Fonfara (keyboards, arranger), and Peter Hodgson (bass). As would be the case throughout the band's entire career, the majority of the album's songs were written by Pope and Staples. In the same year, Geoff Travis opened the first Rough Trade record shop in London, reportedly taking the appellation from the band; this eventually led to the formation of the similarly named Rough Trade Records in 1978.

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