I regularly use Norbert’s Gambit approach to convert USD to CAD (and vice versa) via RBC Direct Investing.

The process is smooth through RBC, but not all discount brokers are created equal and you need to find out if your discount broker can support this.

Questrade supports the strategy, for example, but the journaling of the stocks is not automated and you need to contact them.

Make sure the Norbert’s Gambit goes smoothly by asking your discount broker about the ability to capture the stocks.

What you need to know about DLR and DLR.U is that both are traded on the Toronto Stock Exchange (TSX). If your discount broker does not support the process and it is important to you, you can always consider changing the discount broker.

The steps to convert USD currency to CAD dollars using DLR as an ETF (Horizons US Dollar Currency ETF). As mentioned earlier, the steps are based on experience with RBC Direct Investing and other discount brokers may have additional steps and you should ensure that your discount broker has dual currency support for the account.

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How much do you save with the Norbert Gambit?

You save the spread minus the 2 transaction costs when using DLR and DLR.U. The Norbert’s Gambit can be done on all dual-traded stocks, but I’ve found that the stock price fluctuates more.

Let’s say you want to convert 1,000 Canadian dollars to US dollars, and the exchange rate is around 1.28 Canadian dollars to buy 1 US dollars. You would expect to get $ 781.25 USD, but that’s not entirely true as forex includes a spread in each direction as profit for the exchange offices.

In Norbert’s Gambit, the spread is very small, but you have to place a buy and sell order. The resulting amount would be closer to $ 761.25.

If you were using a bank forex currency, your spread would be higher than if you were using a forex house.

Norbert’s Gambit with DLR through your discount broker you get the best exchange rate.

This is what RBC looked like when converting USD to CAD when the rate is 1.32. You can expect similar costs going the other way.

  • Through banking would have given me $ 1000 US $ 1260 (cost of 0.06 cents)
  • Through the discount broker, I would have given $ 1000 US $ 1280 (cost of 0.04 cents)
  • With Norbert’s Gambit I get 1300 USD (cost of 0.02 cents) (including the fees of 9.95 USD each way)

Norbert’s Gambit with RBC Direct Investing

Using DLR to convert currency with RBC Direct Investing requires 3 steps. It’s very easy.

Step 1 – Buy DLR.U on the TSX

As soon as the US currency is in the account, you initiate a purchase transaction from DLR.U. Make sure you select the USD account to complete the transaction. Note that it is traded on the TSX and is quoted in US dollars, unlike other stocks that trade twice between the NYSE and the TSX.

A smart transaction tip is to always limit your stock trades. I set my limit at $ 9.95 and waited 2 days for all of the stocks to be bought. You decide on the limit. I tend to choose the letter limit, and that’s just to make sure I’m no longer paying due to market transactions.

Norbert's Gambit DLR - USD

Step 2 – Sell DLR on the TSX

Once the transaction is complete, I will initiate the sale for DLR in Canadian dollars for the number of shares I have bought. Again, I am using a $ 13.35 CDN limit price and using the CAD dollar account to complete the transaction.

When I placed the sell order there was a warning about the exchange rate, but I checked with RBC Direct Investing that there are no fees. Since DLR.U and DLR are exactly the same shares in different currencies, there are no fees.

Norbert's Gambit DLR - CAD

Step 3 – get your money

Unfortunately, you have to wait for the transactions to complete to withdraw the funds from the account and it takes about 2 days. If you want to convert your currency from CAD to USD, all you have to do is buy DLR first and then sell DLR.U.

If you select the wrong account to conduct a transaction, the discount broker will immediately conduct a currency transaction. Check the accounts from which you are transacting. If you want to convert CDN to USD, just start by buying DLR and then all you have to do is sell DLR.U.

Norbert’s Gambit with Questrade

Step 1 – Buy DLR.TO on the TSX

Select ‘TRADE’ (the big green button) and enter DLR.TO in the order entry form. Based on the amount you need to convert, calculate the number of shares you can buy. I usually use the ask price to calculate the number of stocks and I use the limit order.

Questrade - DLR order entry form

The ETF purchase has a transaction cost of $ 0 but may include an ECN fee (learn more about ECN fees – reading / removing liquidity).

Step 2 – Wait for the transaction to complete

The transaction will be processed after 2 working days (T + 2). This means that you officially have the shares in your account. As soon as you see DLR.TO in your account, contact Questrade by phone or chat to record the shares as DLR.U.TO.

Step 3 – Sell DLR.U.TO on the TSX

As soon as you see DLR.U.TO in your account, you can place your sell order with the same number of shares. The transaction cost is Questrade’s sales fee plus the ECN fees in the currency of the trade.

Step 4 – get your money

You’ll have to wait for the transaction to complete (T + 2) and then you can transfer your money or use it to buy your favorite dividend stocks!


Norbert’s Gambit with TD Direct Investing

Step 1 – Set up a dual currency account

Make sure you’re set up with a dual currency account. You may need to call to set up or use your preferred channel of communication with the discount broker.

Step 2 – Buy DLR.TO on the TSX

Select your account from which to make the purchase, enter the DLR symbol and select the ETF. It should show the quote on the right. Based on the amount you need to convert, calculate the number of shares you can buy. I usually use the ask price to calculate the number of stocks and I use the limit order. Don’t forget to subtract $ 10 from the total to cover trading costs.

Step 3 – Wait for the transaction to complete

The transaction will be processed after 2 working days (T + 2). This means that you officially have the shares in your account. Contact TD Direct Investing after 2 days to have the shares registered as DLR.U.TO. You are effectively moving the stocks from your CAD account to your USD account at DLR.U.TO (or vice versa).

This step will take another day to take effect

Step 4 – Sell DLR.U.TO on the TSX

As soon as you see DLR.U.TO in your account, you can place your sell order with the same number of shares. I tend to use the limit order based on the price at the time of the trade.

Step 5 – get your money

You have to wait for the transaction to complete (T + 2) and then you can transfer your funds or use them to purchase your next investment.

Norbert’s Gambit Results

I’ve got great results and the rate is very competitive. I tried local exchange offices and also looked at xe.com.

Obviously, the cost of the transactions is around $ 20 and requires a reasonable amount to ensure you don’t overpay any fees. Otherwise, it might be better to go to your local currency exchange office.

I am very excited to be using RBC Direct Investing and DLR for my currency exchange, even if the total time is about 3 working days before I can access the funds and a little longer with other discount brokers.

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