With the U.S Dollar (USD) gaining strength in the global currency game, it has resulted in the Canadian Dollar (CAD) losing some ground.  While this means that shopping in USD is more expensive for Canadians, it’s great news for those who have some of their nest egg or generate income in USD.

While it’s a great time to own USD, how does someone convert USD to CAD without getting gouged by the bank?  The answer – Norbert’s Gambit.

I wrote an article about Norbert’s Gambit using the DLR and DLR.U ETFs as a cheap way to convert CAD to USD.  Basically you would

  1. Buy the DLR ETF in CAD;
  2. Ask the discount brokerage to journal your CAD DLR position to USD DLR.U (usually by phone and free of charge, others are automatic); and,
  3. Sell DLR.U in the US market. 

Voila, you now have USD without the big FX fees (up to 2% of total conversion).  While the process may take up to 5 days to complete, there is very little currency risk as your foreign exchange rate (FX) is locked in as soon as you buy DLR.  Here’s an article providing a little more detail on the DLR/DLR.U conversion with Questrade.

Using DLR/DLR.U is a cost effective and low risk way to convert CAD to USD, but not as great when converting from USD back to CAD.  The reason is that going in reverse order, buying DLR.U and selling DLR, exposes you to FX volatility.  In other words, while waiting for your shares to journal over (up to 5 days), the FX rate (ie. the value of DLR) can changed dramatically.

So back to the question, how do we use Norbert’s Gambit to cost effectively exchange USD to CAD with minimal risk?  This strategy will allow FX at around spot rate and involves;

  • Buying and selling highly liquid “inter-listed” stocks (ie. stocks listed on both the TSX and NYSE); and,
  • Using a discount brokerage account that automatically journals (ie. moves) shares between CAD and USD (RBC Direct Investing or BMO InvestorLine).  The automatic journaling of shares is an important feature as it reduces the risk and amount of FX movement while you are holding the shares.

Inter-listed Stocks

Here are a list of potential high volume, low bid-ask spread stocks that are inter-listed on the TSX and NYSE(generated from TMX.COM).  Personally, I like using the big banks, the higher the share price, the better.

TSX/US Symbol Issue Name

AGU/AGU Agrium Inc.
BMO/BMO Bank of Montreal
BNS/BNS Bank of Nova Scotia (The)
CM/CM Canadian Imperial Bank of Commerce
CNR/CNI Canadian National Railway Co.
CNQ/CNQ Canadian Natural Resources Limited
CP/CP Canadian Pacific Railway Ltd.
CVE/CVE Cenovus Energy Inc.
ENB/ENB Enbridge Inc.
ECA/ECA Encana Corporation
IMO/IMO Imperial Oil Limited
MFC/MFC Manulife Financial Corporation
POT/POT Potash Corp of Saskatchewan Inc.
RCI.B/RCI Rogers Communications Inc. Cl B NV
RY/RY Royal Bank of Canada
SLF/SLF Sun Life Financial Inc.
SU/SU Suncor Energy Inc.
TCK.B/TCK Teck Resources Ltd. Cl B SV
TRI/TRI Thomson Reuters Corporation
TD/TD Toronto-Dominion Bank (The)
TRP/TRP TransCanada Corporation

Instructions on Converting USD to CAD

1.  Using a BMO (BMO Investorline review) or RBC discount brokerage account, buy an inter-listed stock (listed above) with high volume/liquidity and with a low bid/ask spread.  Since we are converting from USD to CAD, buy the USD version of the stock at the “ask” price.  You can also use this trick for converting CAD to USD but you would do the opposite and buy the CAD version of the stock.  Lets use an example of buying RY on the NYSE @ $72.83 USD (Nov 14, 2014).

2. After executing the BUY trade, immediately initiate a SELL in the opposite currency.  In this example, if you bought RY on a US exchange, immediately sell RY at the “bid” price on the TSX (ie. in CAD).  On Nov 14, this would have resulted in obtaining $82.21 CAD, this works out to be about spot rate (ie. no extra FX fees) depending on the bid/ask spread.

3. You may notice that the balances in your brokerage account may seem a bit “off”.  Effectively, you have shorted a stock thus sometimes showing a negative balance, but the system will sort itself out within a week or so.

Alternatives to Low-Cost USD to CAD Transactions

There is an additional alternative to paying less on FX fees, which is simply transferring funds between your CAD and USD bank accounts. You can circumvent the bank’s FX fees by moving your funds through a third party provider. Foreign currency providers will receive your CAD or USD through a domestic transfer, exchange them, and transfer the funds back to your account (or another recipient, if you are making a payment). WorldFirst, a FINTRAC regulated provider, offers the best margins currently, with a fixed fee of 0.5% on each transaction, and as low as 0.1% if you are transferring large volumes. Please note the company does not accept U.S based customers, so you must have a Canadian address to sign up with.

Final Thoughts

While using this strategy is a cost-effective method of eliminating the hidden fees that discount brokerages charge for FX conversion, there are some caveats.  First, you need to have an account with a discount brokerage that offers automatic journaling of shares.  Without this, you are exposing yourself to FX and share price volatility.  In addition, you need to pick an inter-listed stock with low volatility.  To help reduce volatility, do a quick “news” search of the company for that day and avoid this strategy during company earnings.

I’ve used this strategy a number of times with my BMO Investorline account and it has saved me money every time.  Check out my full review here.

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I’m confused; why would the risk of using NG with Questrade to convert CAD->USD be any different than converting USD->CAD? Isn’t the FX volatilty risk arising from the up to 5 day delay for journaling the same in both cases?

Hey FT, awesome article and discussion.

I’m probably one of the early adopters of Norbert’s gambit and can unequivocally state the following based on my experience with RBC Investing using their online trading portal (they do have automatic Journal, I never had to call RBC broker):

1) Buy X units of DLR.U, the order (I always place market order) usually gets filled in less than 1 min, the biggest order I ever placed was for 13,000 units
2) Immediately sell X units of DLR, again usually gets filled in less than 1 min of placing the order
3) The sell price of DLR gets locked in the moment sell order for DLR gets through, so within couple of minutes of starting DLR.U transaction, I get USD/CAD rate locked in
4) after 3 business days I get CAD in my bank account, converted at the rate locked in at step (3) above.

So, based on my experience, I do not quite follow your caveat regarding going DLR.U -> DLR route.

Pretty much same as A, except in reverse order

I just converted 20K from USD to CAD at TD Waterhouse. Because I didn’t want to wait 5 days I just phoned them after buying DLR.U on the USD side of the cash account and asked to sell DLR immediately on the CAD side of the account. Actually, I had to phone twice as the first trader didn’t know (didn’t want to?) how to sell immediately and log a journal. The trader on the second call knew exactly what I was trying to achieve and sold DLR right away and submitted the journal request. So no waiting – you just need to phone the brokerage. Basically, I think the way it works is a trader is able to sell a security (DLR) that doesn’t exist in the account knowing it will be there (journal) by the settlement time (but an investor can’t do it him/herself). And the previous time when I did the Norbert’s Gambit in this direction I even bought some ETFs in CAD by asking the same trader on the phone to submit the buys for me (she still charged me just $9.99 commission as if I was making the trades myself).

FrugalTrader – thank you for this post. I am moving from US to Canada and will be going over your other posts to get a better understanding of investing scene in Canada.

igra – thank you for your reply. I have a TD Canada Trust CAD and USD account. I will be first transferring money from my US TD Bank Account to TD Canada Trust USD account. If I understand correctly I will need to open a TD Direct Investing account to execute the steps you mentioned. To buy DLR.U can I just use the funds from TD Canada Trust USD Account and then follow the steps you mentioned?

Welcome to Canada! :)
Yes, exactly, you’ll need a TD Direct Investing account.
To buy DLR.U you’ll need to transfer cash from TD Canada Trust USD Account to the USD side of your trading account and then buy the ETF. Make absolutely sure you’re transferring to the *USD* side of the trading account because if funds are transferred to the CAD side they will be converted to CAD at TD’s – unfavorable – rate. :)
Happy Gambitting! :)

@FrugalTrader: I only have experience doing the gambit with DLR.U/DLR. The first trader was ready to submit the journal request but told me I’ll have to wait for it to complete before I can sell the shares. I think he either never had to deal with a “gambitter” or was reluctant to help since the brokerage won’t earn the FX commission – which was it I don’t know. I’ve read on investing forums before that if one encounters such situation then it’s best to just thank the trader and hang up. Then call back and hopefully the next trader will be more knowledgeable/understanding which was exactly the case for me this time. The previous time I did the gambit I didn’t have any issues at all. The very first trader I got knew exactly what I was trying to do (save on FX conversion). She executed all the trades for me flawlessly and charged only $9.99 (which I made sure to ask about before confirming the trades).

So all in all I don’t think the choice of security (DLR) was the issue but rather lack of experience or unwillingness to do the gambit on the part of the trader.

Once you’re done, how do you go about getting the cash in USD in your pocket? Or how do you pay for stuff in the US using the money in your Questrade account?

A guy on the DLR/DLR.U conversion with Questrade page, named A.M. (Comment 7), said it can be done completely online at Questrade. Does anyone know how to do it completely online at Questrade? I am looking to do USD to CAD (so it will be reverse) as I have much of my $ in my margin account in USD.

Just a little info for those who might not know. Norberts gambit isn’t even needed anymore for CIBC Investors Edge RRSP and TFSA accounts as they now convert between USD and CAD at close to spot rate.

frugal trader: your answer in 2. doesn’t make any sense to me.

a)”@Don, good question. DLR moves with the value of CAD. The thing is that when you buy “DLR” you are locking in your FX rate,”
FX rate is locked in when buy DLR.U

b) “so it doesn’t matter how long journaling takes. However, the other way around, and you buy DLR.U (generally static), you have to wait 5 days or so for shares to journal over so that you can sell DLR, which may have changed in value over that time.” Journaling should take the same both directions

@Igra. I think TDB has only recently started charging just $9.99 for doing the trade for Norbets for you, so it’s worth confirming that to avoid getting dinged for $43.
@Frugal Trader. The other point about using an inter listed stock is that bid ask spreads are likely to be a bit less.

Hi FrugalTrader,

I just contacted Questrade to inquire about journalling over an inter-listed US stock to its Canadian counterpart in my RRSP account. They said that I would have to wait 3 business days for the equities to settle before they could do it (you have to contact them, it is not automated or automatic). So, my question to you is, which of all the available methods would have the lowest cost to convert while also mitigating any risk associated with the 3 day delay?


@Dave. I have also noticed CIBC Investor’s Edge offers a favourable exchange rate in a RRSP account (when compared to a non-registered account). Did you actually get this confirmed with Investor’s Edge or was this an observation on your behalf.

@ Everyone. Does anyone here with CIBC Investor’s Edge know whether they make you wait 3-5 days for journal between DLR / DLR.U or is done right away?

If I understand correctly, there’s actually little risk in doing the ‘backwards’ trade of USD to CAD. In the forward transaction (CAD->USD), you lock in the exchange rate with the purchase of DLR.TO on Day 1. If you already hold USD, then you can simply buy DLR.U at negligible cost in advance of when you might want to trigger the conversion. You can then wait for an opportune time and then sell DLR.TO when you want to. The only real cost is that there’s no income while you’re holding DLR.U. In other words, you would be exposed to the same level of currency volatility if you held USD from say Day 1 to Day 5, then both bought DLR.U and sold DLR.TO on Day 5, as if you bought DLR.U on Day 1 and sold DLR.TO on Day 5.

The only situation in which I can imagine someone being very concerned about this is if they received USD on one particular day and absolutely had to get the money into CAD at today’s spot rate. But since there’s natural volatility between the currencies, there’s already randomness in how much your USDs are worth based on when you get the USD – you’re just as likely to benefit as to lose from the modest shifts between these currencies over a timeframe of a few days. While it’s possible that the exchange rate can shift by a percent or so over a week, this gambit is aimed at cutting out the otherwise certain 1-2% conversion charge that banks would charge regardless of when you decided to pull the trigger.

I’m having a hard time getting my head around this, hoping ajho or anyone can walk me through this one step at a time. I have a Td USD account and Td CAD account both unregistered. I want to buy CAD with my USD (15k).
So i go into my TD USD a/c and buy 1504 DLR.U (9.97 ask). Now they sit in my USD a/c. So I then immediately sell them as out of my USD a/c as DLR ….will the online account accept this, as you don’t actually have DLR in your account?. After you do sell it (if I can), how do I get the settlement into my TD CAD account?


I have done exactly as Marc described. I also confirm with the trader I will be charged $9.99 for the trade and not the higher telephone rate, just to be sure. It may work that you sell DLR first and then call the trader to ask for the journal over, but I have never tried to do that. Hopefully TD will bring in auto journaling as RBC, and I think BMO already do.

Hey Grant…tell me what I did, so I can then do it…LOL. Are you saying that as soon as DLR.U is in my USD account, I can then immediately sell it as DLR?…in my USD account & then I would then call TD and tell them to move it to CAD account. How is it that CAD dollars sit in my USD account??? I’m confused.

If the Horizon etf fund is not journalled, and we try to sell it again, it will go back to the same account and the same currency. I experience this by accident.
Example: DlR.u rate as of Aug 6, 2015 was $9.96. I bought 1000 share =us$9960.
Sold in the afternoon without getting them journalled (due to being ignorant on the process), the rate was at $9.97= I got US$9970. deposited back to my US account. Exchange rate is minimal on DLR.U

What happens to DLR exchange rates by waiting for the right time to sell? As of Aug 6, 2015. Rate for the day varied from CA$13.15 to $13.08. If we own 1000 share, the difference is ca$70. For 10,000 shares the difference is CA$700. By watchfully following a Real time quote USD/CAD currency exchange chart( even after hours) and some updated news, we can speculate when the right time to buy or sell DLR shares. I also watch BNN (Business NEws NEtwork) for updated news on what is happening with the Oil and Other industry, since the price of Oil affects the value of Canadian currency.

Joshua, I’m not sure I understand your first paragraph. Once you buy DLR, you have locked in your exchange rate and own US$s. Not matter how long you wait to sell it (as DLR.U on the US side) you will get the same number of US$s. Maybe what happened in your example was that because you waited to try to sell DLR on the Canadian exchange until later, the brokerage used the current C$ exchange rate, and converted C$ to US$ at that rate, so you got $9.97. It could have just easily gone the other way. I’m surprised they didn’t just give you an error message and ask you to call in. Correct me if I’m wrong, here.

DLR.U fluctuates to a minimal. In March, the rate was $10, today’s rate was $9.97. I bought/sold DLR.U with royal bank the first time , not understanding the Journaling process.
This actually happened to me 6 months ago during my first time trading DLR.U. Either I or the RBC trader screwed up , since the shares were not journalled. I called in, spoke to a trader for assistance, I requested and sold the DLR.U shares on my USD account, by phone order, (with exception of not having to pay the higher $45 fees. ).To my surprise, the final currency funds were back in USD at my US trading account, and was not converted as I requested. I did not know I had to use my Canadian account this time to sell with DLR, even if no shares will visible on my account. No visible statement was showing on both US and CA account can cause potential confusion for first time trader. I paid $20 commission for both trades .

It is an easy process once we have done it once, but for first time trader, new to journaling of shares, not visible statement until settlement date, and anxiously aiming to get the best spot rate for the moment, buying and selling DLR and DLR.U can be somewhat confusing or intimidating, especially if one trades a large amount of shares aiming to time the market.

I did the same process last week due to not happy being with Questrade , being a new client, and having to pay unsuspecting higher hidden ECN fees.. I bought and sold DLR.U the same day….. on purpose this time, after I realized I cannot trade to DLR the same moment and have to wait for the CA exchange rate three days after the fund settled. My decision was to get my funds out of Questrade. You can read my comment further down.

No, the way I have done it is to ask TD to journal DLR.U to the Canadian side, then sell it as DLR. DLR.U only becomes DLR when it gets to your Canadian account. You could try selling DLR from your Canadian account before you ask TD to journal DLR.U over, but I’m sure it wouldn’t work. It does work at RBC because they have auto journaling.

Thanks for the help….I was reluctant to call TD as I read on a few different blogs that
TD frowned on this behavior, and I didn’t want them to tell me I couldn’t do it without paying full commission and have record of the conversation(they record all calls)
I finally called them without identifying myself and they were fully supportive and gave me the instructions on how to do it…. They did stipulate that if I wanted to sell it right away, I would have to pay full commission on the sell side (which was about $100). I just have to call them after making the buy…and they will journal the purchase over to my CAD side, but I cannot sell it for 3 days(until its settled) to get the 9.99 commission.
Thanks again.

Since I got ticked off having to pay an unsuspecting ECN Fees, and have to wait up to 10 days to get funds settled using Questrade. I have decided to write my concern. I joined Questrade because they promote no ETF commission fees to buy, and free 100 commission for account with $10,000 or more. However, when trading big volume of share on DLR, they have hidden ECN fees which could be higher then a flat $10 commission.

Questrade charges ECN FEES OF .0035 to buy an ETF fund is the catch to unsuspecting Client, though they claim they do not charge a commission for buying the Horizon ETF. I had to pay non-rebateable ECN fees of US$35 to buy 10,000 share of DLR.U. I was DISAPPOINTED with the hidden fees. Then have to wait three days for the funds to settle , not knowing what the exchange rate would be. Call and wait for up to 10 minutes to get someone to journal the share, finally pay the $10 commission to sell it. If the exchange rate is not good after the third day of settlement, we will regret with the Nobert’s Gambit process, and if better, we are glad for the wait. To access the fund again, we have to wait another 4 days for the funds to settle before one can buy again. A Total of almost 10 days , just too complicated for regular serious trader who might want immediate result. To withdraw money out of Questrade, via e-transfer, will take another 3-5 days, and maximum of $25,000 per day will be release.

Horizon do not charge the ECN fees that Questrade collects. I am not sure who eventually pockets the ECN fees.

When trading with Royal bank and TD with on line trading account, anyone can trade, get the spot price after the share gets journal-led. No need to wait for three days to settle. Royal bank automatically journal the shares, while we need to call TD waterhouse to get the DLR share journaled first then sell. If one is part of Royal bank premier margin account, we could use the fund right away to buy and sell, no need to wait for three days to get settled. The $10 Commission to buy or sell is small amount to pay for the peace of mind of getting the spot rate that we wanted, and avoiding higher bank commission.

Why would anyone use Questrade? We do not know how much the exchange rate we will get three days later, then higher ECN fees for trading big volume. It could be better or worse exchange rate we might get based on the recent Canadian dollar volatility. While with Royal bank or TD, (though we just have to pay $10 commission to buy) we can get the exchange rate as soon we buy and sell Horizon DLR right away if we want to, no need to wait for three days to settle, and no need to pay higher 0.0035 ECN fees if one is trading at a big volume shares.

For new account with TD or Royal bank , they offer free 20-100 commission up to 60-90 days for first time client. Refund of commission only happen after the 60-90 days term. Questrade also offers the same promotion, but hidden ECN fees might exist on certain funds. Unless one call and ask first before trading, and have to wait on the phone for slow customer service, why bother?

One good way of maximizing your potential return is to watch/use this site for USD/CAD real time currency exchange. the system work even on weekends or middle of the night, since currency exchange never goes to sleep. http://www.dailyfx.com/forex/technical/home/analysis/us_dollar_index/2015/03/26/dailyclassics_us_dollar_index.html

Whenever I watch the currency volatility for the moment, I could kind of speculate when I will be ready to trade the DLR shares, either trade now or wait till next day.

If all shares were not sold within the same day, we will be charge additional $10 on commission fees for share sold the following day. Here is a scenario:
1.We put a Sell on 5000 shares at 3:45pm. Only 3000 shares were partially sold by market closing at 4pm. Remaining 2000 shares will be sold the following day. We have to pay two commission fees, a total fee of $20. Some advantage at times for unsold partial shares could be, ……….. If we speculate that the DLR Canadian exchange rate will get better the following day, we can change the limit price of the remaining unsold shares, before the next day trading session. If the rate seem to get worse, we can cancel the unsold partial share order and wait for a better time to sell them. We can speculate the volatility of Canadian currency by watching a Real time USD/CAD currency exchange rate graph, where currency exchange trading continue to happen even after Canadian stock exchange trading hours closes.

This is all so very interesting! I would like to transfer some of my Canadian stocks to sell in order to buy US stocks BUT I am concerned about the tax implications… My questions:

1. How does Rev Canada get paid on taxable gains when an inter-listed stock is transferred from a Canadian to a US account – i.e. at what point is a gain (or loss) crystallized for reporting?

2. Presumably transferring stocks that qualify for tax credits under tax loss selling rules, would negate your ability to claim the loss. Is that the case?

3. Given perceived complexities with the taxman, would it reduce the tax hassle factor if we confine the Norbert Gambit, to stocks transferred between CAD & USD REGISTERED accounts only?
(TFSAs are not recognized in the US as being tax free so investors need to be aware of any tax implications there.)

4. Are there any other tax snakes in the grass waiting to ensnare the unsuspecting?

PS Who the heck is Norbert?

not sure why my comment went missing

RFD and my recent call to TDDI confirms that they want full agent commission if one does same-day journal & sell
e.g. $10K USD in TD USD buy and sell TD.ca will costs about $10 to buy, $43 to sell

I think I’ll just buy DLR.U in USD ($10 commission), call to journal, wait 3 days to see it appear as DLR in CAD Margin, and sell whenever I like

USD is 1.37x CAD, crazy!!!! 11 year high

You can use this calculator to find out how much Norbert’s Gambit will save you vs using a regular retail FX rate:

It picks up live prices for DLR (you can adjust these if you want), and gives you your effective exchange rate.

In order to do this with RBC or TD, do you need a margin account or regular one?

Tried to it with National Bank and they told me (2 different CSRs) this cannot be done and will have to wait until settlement date first then the transfer can be made.

Anybody had any luck with them?

If your broker doesn’t do automatic journalling, then you can convert USD to CAD like this and avoid FX risk:
1. Buy DLR.U with half your portfolio and FXC with the other half. Wait for DLR.U to journal over to DLR. During this time, you will have a net 1x USD exposure (2x with DLR.U and zero with FXC).
2. Sell DLR on CAD side. Buy DLR.U on remaining USD side and journal it over to DLR. Again, you’ll have net 1x USD exposure during this time

going from us to cdn seems risky with NG. I recently exchanged 500k us to cdn using fidelity at a fee of 30bps (0.30%), in other words it cost me $1500 off the rate. the interbank rate is 0.10% , that’s what the banks charge each other, impossible for the average guy to get that rate. money was converted instantly with no other fees or hassles. knightbridge offers close to the same, just a few bucks more.

Brian, there is no risk at all doing Norbert’s Gambit with DLR/DLR.U and less expensive than 0.3%. On $500k, the cost would be 0.2% (two spreads of 0.1% when buying and selling the ETFs) plus the two commissions – $1000 plus $20.