Norbert's gambit: A better way to buy U.S. dollars

Norbert’s gambit: A better way to buy U.S. dollars

By Dan Bortolotti on January 20, 2012
Estimated reading time: 2 minutes

Use Norbert's gambit to get rid of those currency exchange fees when trading your Canadian dollars for American ones.

If you trade online and you want to exchange your Canadian dollars for U.S. greenbacks, prepare to get gouged. Most discount brokerages charge a fee of about 1.5%—or a whopping $150 on a $10,000 transaction. But we’re going to let you in on a little-known technique that virtually eliminates currency exchange fees. It’s called “Norbert’s gambit,” after Norbert Schlenker of Libra Investment Management in Salt Spring Island, B.C. As far as we know, he pioneered the idea of using shares listed on both Canadian and U.S. exchanges to exchange your currency for less. Thanks to the new Horizons U.S. Dollar Currency ETF, Norbert’s gambit is now easier than ever. This ETF is available in two versions. The first, with the ticker symbol DLR, is bought and sold in Canadian dollars, while the second, DLR.U, trades in U.S. dollars. The difference in price between the two versions reflects the current exchange rate: at press time, DLR was trading at $10.18 Canadian, while DLR.U was priced at $9.96 U.S. Here’s how you can use this ETF to exchange $10,000 Canadian:

Get a quote for DLR and calculate how many shares you can buy for $10,000 Canadian.
Place an order for that number of shares. The trade will settle in Canadian dollars.
Call your discount brokerage’s customer service desk and ask them to take your DLR shares and “journal them over” to the U.S. dollar side of your account, where they should show up as DLR.U.
Place an order to sell all of your DLR.U shares. The trade will settle in U.S. dollars.

You’ll pay two commissions and lose a little on the bid-ask spread, but you’ll still save big overall. Note that this technique only works if you can hold U.S. dollars in your account. Most brokerages don’t allow this with RRSPs.

Comments Cancel reply

hon ming chan says:

June 7, 2020 at 10:07 am

i like to know if it works on cibc investors edge rrsp and tfsa accounts.

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tony swift says:

December 4, 2020 at 9:45 am

does this work for scotia i trade tfsa accounts?

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Will cherry says:

January 12, 2021 at 4:47 pm

It works on TD webroker. In fact you can use this system on any stock that’s interlisted. For example CNR on the TSX is listed as CNI on the NYSE. Buy shares of CNR in your Canadian account, wait a day or so until it settles, and then transfer them over to your US dollar account using the securities transfer function. Once there sell the shares to turn them into us dollars at no currency exchange fees.

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Bill Fretts says:

January 29, 2021 at 7:43 am

Yes, works for Itrade cash and RRSP accounts. Makes no sense to me to try it on a TFSA because you will pay US taxes on gains which is the point we wanted to avoid with TFSAs.

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Ed Nolij says:

February 22, 2021 at 5:09 pm

@Bill Fretts, are you sure about “you will pay US taxes on gains” for USD TFSA account ?

I thought we pay 15% tax on dividends earned and 10% tax on interest. And no taxes on the actual gains.

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Richard Small says:

February 23, 2021 at 10:14 pm

Bill Fretts

You only pay taxes on dividends from us stocks in a tfsa. You dont pay taxes on the capital gains. So simply hold US stocks that you believe will go up in value that don’t pay a dividend.

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Karan Kapoor says:

June 1, 2021 at 6:23 pm

No problem doing this at TDDI (without calling TD, entire conversion is done on-line)

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vaithee says:

June 17, 2021 at 12:52 pm

Recently Remitbee introduces currency exchange service for cad to usd and usd to cad, which is better than Norbert gambit. You can get mid market rate, zero fees and money exchanged within 2 days.

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Michael Kelly says:

June 19, 2021 at 9:40 am

So, would this trade work in reverse when your ready to convert your assets back into CDN?

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