How to reduce foreign exchange costs using Norbert’s Gambit

What is Norbert’s Gambit?

Norbert Schlenker, the president of Libra Investment Management, reportedly came up with the idea for Norbert’s Gambit nearly 40 years ago. The concept became more prevalent over the past 20 years.

Schlenker used his idea to convert currency between Canadian and U.S. dollars using inter-listed stocks. For example, some Canadian stocks listed on the Toronto Stock Exchange (TSX) are also listed in U.S. dollars on the New York Stock Exchange (NYSE). This inter-listing can allow an investor to buy in one currency and sell in the other currency, effectively converting dollars for only the cost of trading commissions.

An example of Norbert’s Gambit with RBC shares

On Feb. 14, 2025, Royal Bank of Canada (RBC) shares closed at $168.67 per share on the TSX. On the NYSE, they closed at $119.04. The price difference represents the foreign exchange rate between the two currencies. The Canadian-dollar shares were trading at about a 1.417 premium to the U.S.-dollar shares because the U.S. dollar closed at 1.418 Canadian dollars on Feb. 14, 2025.

As the currencies move, the shares on the two exchanges should be worth almost the same, after accounting for the foreign exchange rate at the time.

An investor may be able to purchase Royal Bank shares in Canadian dollars on the TSX and then “journal” the dual-listed shares to NYSE-listed Royal Bank shares, selling them in U.S. dollars. “Journaling” refers to transferring equivalent shares from one exchange to another.

A better solution: DLR ETF units

One problem with buying inter-listed common shares is that the shares can fluctuate in value.

Norbert’s Gambit can also be implemented using an exchange-traded fund (ETF) like the Global X US Dollar Currency ETF, which trades in Canadian and U.S. dollars on the TSX. The ticker symbol is DLR (Canadian dollar) or DLR.U (U.S. dollar).

The DLR/DLR.U ETF tracks the value of the U.S. dollar in either U.S. dollars or Canadian dollars, so the investor may be less exposed to changes in an underlying stock price that can be volatile.

How to implement Norbert’s Gambit

Some discount brokerages like Questrade have a process for journaling shares built into their trading platform. Others may require an investor to speak with an agent by phone to complete the transaction. Self-directed investors should review the policies and procedures at their discount brokerage to make sure implementing Norbert’s Gambit goes as smoothly as possible.

Some drawbacks of Norbert’s Gambit

There are some drawbacks to using Norbert’s Gambit:

• Questrade acknowledges that journaling can take up to five business days to process. The process can be even more cumbersome if your brokerage requires a phone conversation.
• Brokerages may charge fees to journal shares. Questrade, for example, has announced that a processing fee of $9.95 will apply as of April 1, 2025.
• If you use inter-listed common shares, there can be a bid-ask share-price spread that increases the effective cost of the transaction.
• If you are converting from Canadian dollars to U.S. dollars, some discount brokerages automatically convert sale proceeds to Canadian dollars, which of course defeats the purpose of Norbert’s Gambit.
• Journaling shares may not be available for all accounts at a discount brokerage. So, again, you want to do your due diligence.

Should you try Norbert’s Gambit?

Norbert’s Gambit may be an option to convert between Canadian and U.S. dollars at your discount brokerage. An ETF like DLR may be the most effective way to journal between the two currencies, but inter-listed common shares are often used as well.

Different brokerages have different policies and procedures for the steps involved to make a Norbert’s Gambit transaction, so it’s worth talking to them first to make sure you can implement it effectively.

Read more about currency exchange:

• ETF strategies to help Canadian investors combat a weak loonie
• What is currency hedging?
• Norbert’s gambit: A better way to buy U.S. dollars
• What to do with U.S. dollar RRSPs in retirement

About Jason Heath, CFP

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.

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