Norbert’s gambit is a way to exchange Canadian ($CAD) and US Dollars ($USD) using ETFs at a discount brokerage. It requires a few steps to execute and a couple of days for the money to move. Using Qtrade, that may only take a few minutes of your and be fully online (no humans or phone calls). This extremely cost effective when moving larger sums between your $CAD and $USD trading accounts.
The process may seem intimidating or a hassle. It did to me when first reading and hearing about it. However, it is surprisingly easy. I have broken it up into detailed steps in this post and walk through pretty much every click of the mouse. I know how those simple things can ironically be daunting when moving money.
What is Norbert’s Gambit?
Norbert’s gambit is a maneuver to exchange $CAD and $USD through a discount brokerage without getting fleeced by fees. This can be useful if you want to take advantage of investing in US-listed ETFs (more tax-efficient in an RRSP& generally lower fees) or if you like to spend $USD. Both apply to me.
The Gambit Moves.
First, you buy a security that has both a $CAD and $USD priced version. For example, Royal Bank of Canada is listed on the Toronto Stock Exchange as RY in $CAD and on the US exchange as RY in $USD. Another example is Horizon’s ETF that tracks the US Dollar. Both versions are listed on the Toronto exchange. DLR is priced in $CAD and DLR.U is priced $USD.
Next, you have the security transferred from your $CAD investment account to the $USD version of the account.
Finally, you have your brokerage change the security from one version to the other. This is done on paper (or electrons) and is called “booking over”. For example, I could have DLR booked over to DLR.U when executing Norbert’s Gambit to convert $CAD to $USD. I would then sell it in $USD in my $USD account.
A “gambit” is a calculated move.
Executing Norbert’s gambit isn’t something that can be done when you want the money today or tomorrow. Fortunately, successful investing is about the long-term (years). A few days here or there does not matter in the grand scheme.
Even though it is done over a few days, it really only takes a few minutes per sitting. That said, the fact that it takes two sessions on a computer is likely why people perceive it as a complex hassle. Plus, the jargon like “booking over”. Using Norbert’s Gambit via the Qtrade direct investing platform, it is really one session to set it up and the second session can be done at the same time as you plan to invest the money.
For comparison, using many foreign exchange services requires a phone call and printing/scanning/emailing of declaration forms which is equally cumbersome. You must then move that money from your bank account to your brokerage investment account to invest it. Same with using an exchange via the bank.
This simplest and fastest way to move CAD and USD between Qtrade investment accounts of the same type (RRSP/TFSA/cash), but different currencies, is the “Convert CAD/USD” feature in the Transfer Funds section of their site (screenshot below). However, that also comes at a cost somewhere between Norbert’s Gambit and using your bank. For small amounts of money (<$1000), it is pretty time/cost effective
Time & Cost Comparison for Currency Exchange Strategies
The cost for Norbert’s Gambit is ~$15 in trading fees plus ~0.1-0.2% hidden in the bid-ask spread. In contrast, an exchange using your bank buries the cost in their bid-ask spread and it usually runs ~2.5% of the amount transferred. I have also used exchange house services which have about a 0.2-0.5% spread for sums that I would consider using Norbert’s Gambit for. Converting via Qtrade’s currency conversion has the cost in the spread. That varies by market and amount, but typically runs in the 1-1.9% range for amounts under $25K. Larger amounts have a tighter pricing spread for banks and brokerages. The cost and time comparison for different strategies is summarized in the table below.
A closer look at Norbert’s Gambit’s Cost & Timeline
Time spent depends on the platform used.
The time spent depends heavily on the brokerage that you use. I have used different ones. With Interactive Brokers, I was able to exchange CAD and USD directly on the currency exchange. That is by far the fastest and cheapest way. However, it was pretty intimidating, and I found their platform complex and customer service not great. I have used a bank-based discount brokerage for Nobert’s Gambit also. It was pretty quick to transfer, but I spent a fair bit of time on the phone. Plus, I hate using phones. With Qtrade, it takes me under ten minutes, and I can do it all online.
The stock or ETF that you use also influences the timeline.
The stock or ETF used also influences the timeline & risk.
You must wait for the trade to settle before you can transfer or “book-over” the security that you are using. For DLR/DLR.U, that is the trade-day plus the end of the next day (T+1). For most other ETFs and stocks, the settlement happens an extra day after that (trade day plus two or T+2).
So, using DLR/DLR.U reduces the time lag and risk of being out of the stock market by a day. The one point to be careful of using DLR (T+1 settlement) is if you are selling a stock/ETF that has the usual T+2 settlement, then you need to wait a day before buying DLR. Otherwise, your DLR purchase would settle a day before the cash available from whatever you sold is available to pay for it. Some brokerages don’t warn about it – they just charge interest. For Qtrade, there is a warning box to tick off and if not a margin account, the trade would get rejected.
Using DLR vs other stocks traded on both exchanges.
The other risk is the price volatility of the underlying security. For DLR/DLR.U, the price fluctuates with the $USD:$CAD. So, it is basically a pure currency risk. The price of the $USD may go up or down over the course of the maneuver. However, that is irrelevant since you are choosing to make the exchange and cannot realistically time whether the currency will go up or down over that period. That is market timing.
The downside of DLR is that it has a bid-ask spread of ~0.1% while some really liquid high-volume securities may have a slightly smaller one. However, they would also be subject to the price changes of the company or companies held. That is market-timing for both the currency and the security!
My behavioral savings: Qtrade is fully online. No pesky human contact.
I am not a “phone person”. My dislike and discomfort for phoning people skyrockets further if I have to call a stranger and ask for some type of service. That is magnified, if it is on the edge of my knowledge comfort zone and I am basically doing something to bypass a process their company makes money from (currency exchange fleecing). “Hi, I am calling to make more work for you so that I can circumvent how your company makes money.” Awkward.
So, one of the rate-limiting steps of using Norbert’s gambit for me was that you are supposed to call your trade center and ask them to “book-over” your CAD-denominated holding into a USD-denominated holding. All with a confident Jedi-mind-trick-voice.
Norbert’s Gambit Using Qtrade: Step by Step With Screenshots
Step 1: You have cash in your CAD Account.
I will use my CAD RRSP to demonstrate since the benefits of US-listed ETFs are greatest in an RRSP. You will note that I have nick-named my RRSP to make it easier to identify instead of the alphanumeric code that Qtrade assigns. You can do that too in the “account preferences” section of the Qtrade service center. I will simulate exchanging $10K CAD for mathematical ease.
Step 2: Buy DLR on the Toronto Stock Exchange.
DLR is the Horizons $USD tracking ETF that is listed on the Canadian exchange. I am using DLR since it is directly linked to what I am doing (currency exchange) and not fluctuations of a specific company or market.
Navigate to the trade equities tab.
That will get you to the trading screen. It should be on the Canadian market by default. Toggle the action tab to “buy” and the order type tab to “limit order”. Enter in DLR as the symbol for the Canadian-listed ETF that holds US dollars.
Next, enter the limit price (the most you are willing to pay). I generally make that the same as the asking price because I hate partially filled orders and spending the time and commission twice. In this case, I would enter $13.50.
For the quantity to buy, I divided my money ($10K) by the limit price and round down. For this example, $10000/$13.50=741. So, I would use 740. That would also leave $10 – enough to cover the $8.45 commission.
Then, click review order, double check that it all adds up, and click submit order. It should fill pretty quickly. However, you now need to wait at least three days for the trade to officially “settle”. That is the date of the trade plus two business days. Perhaps you could push before then, but I have not tried that.
Step 3: Wait three (two for DLR) days for trade to settle.
Confirm in your account and account history that the trade settled. [Update: I have since done it several times where I do step 4 shortly after buying the DLR (same day). It then automatically transfers when the trade settles. That is usually at the end of the day two days later.]
Step 4: Transfer The DLR to your USD account.
Go to the Transfer funds menu item.
Select “Move Securities” which allows you to transfer between your USD and CAD account of the same type (in this case RRSP).
Select your stuff to transfer from the drop-down menus.
Step 5: Wait for it to transfer. May take a day.
This could take a day. My account showed it transferred the same day when I did it, but I actually just left it and came back the next day. I had to mow my stupidly huge lawn. [Update: I have since done it several times where I do step 4 shortly after buying the DLR (same day). It then automatically transfers when the trade settles. That is usually at the end of the day two days later.]
Step 6: Find it in your USD Account & Sell it for US Dollars
This is where there can be confusion. The USD version of DLR is DLR.U. However, it will still show up in your USD account as DLR (not DLR.U) with the correct number of units you bought and the value displayed in USD. Don’t worry, all is ok despite this weird display. You can hit the “sell” tab to go to the trade equities screen below. I needed to then manually change the DLR to DLR.U to make sure it sold to $USD.
After that, the cash shows up as $USD in the USD RRSP. Done.
Nice article! Glad to see one brokerage has rolled out an online solution to replace the annoying phone call.
With regard to the risk of DLR falling it’s not a significant risk for the following reasons. DLR mainly holds US Treasury Bills which are very stable financial instruments. US T-Bills are denominated in USD but when you look up the ticker price on the TSX DLR is priced in CAD which of course fluctuates with the exchange rate. What this means is that if you follow the price of DLR it goes up and down in CAD but if you look at DLR.U its price in USD is very stable.
In other words, once you buy, say, 500 units of DLR, it doesn’t matter after that point what the CAD:USD exchange rate does. CAD could go to zero in the intervening 3 days but you’ll still have the same 500 units of DLR which you can sell as DLR.U and get the USD. A good analogy is to think of one unit of DLR as a $10 bill in USD – once you’ve bought the $10 bill, its intrinisic value in USD does not change even if its CAD value does. Buying DLR “locks in” the CAD:USD exchange rate at the time you buy it. (Note that doing the reverse Norbert Transaction, buying DLR.U in USD and selling DLR to get CAD, does not protect you from currency exchange fluctuations).
Thanks Dr. H! That is a great way to frame it. I agree that it is really a non-issue, but I kept seeing it mentioned in articles/comments as I was researching. It would be more of a potential issue if using stocks with a Can/US version. DLR does really seem the ideal method to me.
i use transferwise for several years
it is best solution for currency exchange and travel money
first transaction is freewith this link
not spam but personal experience
it is like p2p transactions with forex rate
Thanks Ivan. Can’t say that I have used it. The fee for $10K using that site is ~0.7%. Much better than the banks, but still higher than Norbert’s Gambit. I have used similar services, like Knightsbridge. The time spent arranging the accounts and transfers etc. was about 10 minutes (longer the first time for set up) and I had to talk to a human. Still, was overall pretty convenient.
The best exchange method that I have used is actually Interactive Brokers where you can exchange the currency directly. I recently did $100K CAD to USD for $2.99 Canadian. That is 0.003% and it took 2 minutes, but the interface was a bit more intimidating than what the average retail investor is probably used to. Also useful for EUROs if that is a need.
This post comes at a good time for me. I’m fairly new to Canada and have some ongoing financial obligations back in the states. I’ll be needing to exchange and transfer about 30k CAD per year to my US bank account. Transferwise is definitely better than my banks, but still a few hundred bucks per year.
Based on these comments, I’ve looked into Interactive Brokers. It looks like they have some account fees and minimum balances and the interface looks confusing to me.
It also looks like Q-trade charges $25 CAD per quarter for balances less than 25k CAD (I’ll be setting up an RRSP at some point next year, so maybe this will serve that purpose).
Does anyone know how Questrade works for Norbert’s gambit? Any advise is much appreciated.
Thanks a lot!
Hey Sean. There is a video for Norbit’s Gambit for Questrade https://www.canadianportfoliomanagerblog.com/diy-investing-tutorials/
The other issue with using Interactive Brokers is that is you want to get cash out, then there is a delay. If you put money into IB from one bank account (in CAD) then buy USD and try to send out to your USD bank account they have 45 day wait period. The reason is linked to sending money out to a different bank account from which it was brought in.
Good luck and thanks for reading!
Thank you again Loonie Doc for another great post. I must confess I have not used Norberts gambit (love the name though!).
I have transferred my investing/trading accounts to Interactive Brokers which has a ridiculously low forex fee, as you suggested. Further their trade fees are insanely low as well, often $1 per lot. This was worth the small effort for a lifetime of trading fees and forex fees when buying USD listed ETFs. As the numbers get large over decades, these fees turn into large sums of money to be saved. The banks make a handsome profit with hidden forex fees. Just FYI Interactive brokers doesnt allow for RESPs and LIRA accounts.
Hey Cowboy Cutter. I just opened an account last month to try it out and will likely make the full switch at some point.
I, too, was awed by the 3D advances that Q-bert brought to the world of 1980s video games, and I’m touched to see I’m not alone.
It was like playing with an interactive M.C. Escher painting, and no amount of recreating an actual disembowelment on a modern shootemup game will touch that excitement I felt.
Passing this article onto my Canadian family members!
Thank you very much for posting this. I have a Qtrade LIRA/LRSP account (which is a locked in Retirement account). In case folks aren’t clear I had a previous DCPP whic is a Defined Contribution Pension Plan from a former employer, that once I left that company, I requested and transfered the funds to a LIRA at Qtrade.
My issue is I would like to do the same Norbert’s Gambit on this account. However Qtrade does not offer a US Currency LIRA account. Can I do it within the CAN LIRA Account or that doesn’t work?
I.e.- buy DLR, then call in and request they book it to DLR.U, wait the requisite timeframes then sell and buy my US ETF in US Funds? Or when they book to DLR.U they will “exchange” it and charge me the exchange fee?
Any insights would be greatly appreciated.
Hi Flema. First off, smart move with the LIRA. We have the same issue with our spousal RRSP at Qtrade – no USD version. I haven’t found a way around that because everything is converted back to CAD. Which USD ETFs or areas are you looking at investing in?
Thank you very much for the reply. I’m a big fan of JLCollins: A Simple Guide to Wealth.
So am concentrating on Vanguard VTI ETF. If I have this correct, a US currency ETF in a US currency registered account (RRSP/LIRA) is not subjected to the 15% withholding tax. A CAN exchange ETF with US holdings in it, is….boo!
We are not millionaires, so realistically this is approx 15% of 1.81% (Dividend payment) of $200k going into a LIRA. That works out to $543 in CAN? But in 15 years assuming 9% average return, now its approx $2k a year lost in withholding.
Additionally- the MERs are higher for CAN ETFs.
But I may be stuck and will have to settle for a CAN exchange US ETF (i.e. VUN.TO)- or I go searching for another discount brokerage that has US currency LIRA accounts. Seems the banks do, but it was a MAJOR hassle getting the DCPP administrator to release the funds- I’m talking 4 phone calls, multiple forms, follow up, follow up… wow. To go through that again to move it out of Qtrade to another broker may not be worth it. Any insights would be appreciated
Yeah, that does suck. XUU has the lowest MER for a Canadian ETF covering the US (still the FWT issue in an RRSP, but MER lower than VUN). XEF holds non-NA developed market stocks directly (so no FWT issue). IF you find a discount brokerage or way to have a USD LIRA or spousal RRSP, please update with a reply. That would be valuable information!
QTrade now has spousal RRSP accounts in USD.
Thanks Rob. That was actually a missing link for our family! Thanks!
why does one need to wait 3 days to settle? why can you not just move the DLR to USD account once the trade has gone- not sure I understand what has settled? Has anyone tried this since you wrote the post or discussed the cons of moving the money same day as the buy?
Hi Gael. I have done it a bunch of times now. You can submit actually the request to move it once it shows up listed in your account. That usually happens same day. However, it won’t actually move to the other account until it has settled. I have started doing it that way (basically so I don’t forget).
Hello! I’m a Canadian living in the US and am looking to transfer/exchange a 6 digit CAD figure to my brokerage account in the US.
I’ve seen many discussions about using Norbert’s Gambit through a Canadian discount brokerage account, something I don’t have and that seems impossible for a non-resident to open, based on these brokerages’ online application wizards.
I’ve also talked to Interactive Broker’s customer service and have gathered my application will likely be denied on account of a lack of trading experience.
My questions are:
1. Is it possible to pull off Norbert’s Gambit using an American brokerage account, practically speaking? (to put it bluntly, is this even worth pursuing as I haven’t found anybody discussing this)
2. The only trading platform I’ve seen mentioned with respect to the “direct trade” possibility is Interactive Brokers. Is there a reason others aren’t mentioned? (e.g. my limited foray into this possibility hinted why – a TD Ameritrade rep told me incoming international wires are exchanged to USD automatically; TD Ameritrade’s forex platform, thinkorswim, seems to have a relaxed entry barrier compared to IB, so would’ve been ideal).
Lacking NG or IB/similar, I’m otherwise stuck with Transferwise, or KnightsbridgeFx, or similar (or big banks), so would appreciate any info to rule out the above nicer options.
Hi Gary. It is a great question. I have not used a US brokerage. I guess the key part would be for the US brokerage to offer CAD trading accounts (along with the USD one). I am not sure if any do. The only platform that allows direct FX trades is IB.
Thanks for answering. “US brokerage to offer CAD trading accounts” – that’d be key.
“The only platform that allows direct FX trades is IB.” I don’t understand enough about Forex trading to interpret this, but it seems to line up with what an Ameritrade Forex support person told me today. Their accounts are funded and drawn from in USD only, and Forex trading happens on “contracts”, not currency directly (hoping I’m communicating this correctly). So that somewhat confirmed (to me) that IB is different.
I’m just about settled on biting the bullet and going with a foreign exchange service.
Great information. Thanks so much for the step by step instructions.
I have a RIF and would like to purchase some US listed ETFs. I would prefer not to open a US RIF at $15US/quarter fee at Qtrade. Is is possible to just purchase the DLR on the TSX within your Canadian RIF and then get Qtrade to journal it over to DLR.U (like I have heard you can do with Questrade) in order to sell it and get the US$ within your CDN RIF then purchase the US listed ETFs?
Hi Lauren. It would depend on whether your RIF allows you to hold USD cash. If not, then the DLR.U would just get converted back to CAD cash when sold.
Thanks for putting together such clear instructions!
I’m going to be moving funds in the other direction USD to CAD. I assume I just reverse the steps and start with DLR.U in my USD account and then transfer to my CAD account. I wanted to check if there are any extra steps or problems going from USD->CAD.
Also, would you recommend breaking up a larger amount into multiple transactions? What would your max be?
Hi Steve. Yes – to go the other direction is simply the reverse. I have done 300K before no problem.
Very helpful post, especially the part dealing with how DLR.U shows up as DLR after moving the securities. Thank you!
Thanks. I have done the maneuver regularly at this point. It is even easier than when I wrote the post. I now buy the DLR and then it shows up in my portfolio view almost instantly even though it hasn’t settled yet. I them request the transfer and it automatically goes when it settles without my having to remember and come back. I just check my USD account a couple of days later and it is ready to sell.
Just to say thanks. Clear, helpful, and it worked.
I’m interested in trying the gambit for the first time in my Qtrade accounts. Can you comment on whether the gambit would work with any of the following ETFs: FAO, HXS and HXT. Those ETFs are commission-free and are available in both CAD and USD currencies. Thanks!
Since they are both in USD and CAD versions, it should work. Of course, there is also going change in the value due to the market changes over the days since they track equity or fixed income rather than the US dollar like DLR does.
Thank you! Much appreciated.
This must work the exact same the opposite way?
Also, These are both listed on the TSX though so I’m not sure how you are avoiding the unfavorable exchange. If you buy DLR.U in your US account, it will be converted (with the 1-1.75% fee) into USD? What am I missing?
Hi Taylor. You need both a USD account and a CAD account. If you buy DLR in the Canadian account and transfer the DLR to the USD account and then sell it as DLR.U in the USD account it pays USD into the USD account there is no exchange fee. Or viceversa.
Are these both not on the TSX though? Wont it convert in my USD account when I buy?
If I do buy first do I just buy DLR-U in my USD account then transfer that to my CAD account. Then sell it as the DLR?
When I have done it, it does not cause a conversion. If moving from USD to CAD, I buy DLR.U in my USD account. It is TSX listed but priced in USD. I then transfer to my CAD account and sell as DLR (priced in CAD).
Interesting that its listed on the TSX but in USD. That should prevent the conversion then. Ill give it a dry with a small amount of money and see if it works! You are a lifesaver!
No problem. It is a bit of mental gymnastics. I did it with a small amount the first time too. Never a bad idea!
I commented above to thank you for this post — I use it regularly. But I’m now perplexed. Looking at my DLR/DLR.U buying and selling last year, I have some Norbert’s gambits when the exchange rate hardly changed but I apparently made a big profit. I suspect my figures — but I’ve triple-checked them.
E.g. April 7, 2020. I bought DLR at CAD$12.73. Exchange rate that day 0.7159, so that’s USD$9.11. On April 12 the exchange rate was 0.7164, a 0.07% change. But I sold DLR.U on April 12 at USD$10.08 – a 10.6% increase!
I suspect this is my error, not tracking error — but I can’t see it. If it’s tracking error, DLR wouldn’t be a safe vehicle for, well, anything: 10.6% is fine if it’s in your favour, but not if it’s a loss.
Hey Adam. There will always be some change if the CAD:USD exhange rate changes. Last year, I did it for my parents and they made 5% in the exchange. The opposite could have happened this past month. The volatility in the exchange rate has been nuts. No one can control that, but at least we keep the exchange fees low. Often better to be lucky than good!
But there wasn’t volatility in the exchange rate over that period (five days in April 2020). That’s my point. The exchange rate had changed by 0.07% but I apparently made 10.6%. Either my calculations are mistaken (but it’s simple and I’ve triple-checked) or DLR has a serious tracking error. Still perplexed!
Weird. Normally the tracking error for DLR isn’t bad. I don’t have a good explanation for it.
Well, thanks for the response. Leaves me nervous. I’m ok with tracking errors in my favour, but …
Ok. The 10.6% gain was, of course, my mistake — which I discovered the twenty-ninth time I checked my data.
But it does look to me as though DLR does sometimes have big tracking errors. I’m going to add to my Norbert’s gambit routine: first, check that DLR:DLR.U isn’t significantly different from the exchange rate.
Thanks Adam. That does seem like a reasonable thing to do. I haven’t found the spread to be much, but the DLR.U does seem to move in larger increments than DLR. Just my feeling – not data.
Have you had any tax implications with exchange when using this method? Or has this been a way around that. Im bringing a large amount of money back to Canadian dollars and need to know what Im being taxed. This is proving very difficult.
I would assume that they would tax the capital gain on the dollar amount coming over (ie. $10,000 USD to CAD $12,000, $2000 capital gain) but then I would be taxed twice sort of, as they tax my gain in my USD account in CAD dollars, then if I were bring it back and the whole amount is taxed again.
I went to a senior accountant and he said it should be taxed at the book cost (with the exchange rate at that time) to the sale price (the exchange rate now), they are obviously not doing this. Also I have brought money over from CAD to my USD account and taken a loss, and never had a capital loss reported. My accountant is now saying that they do not worry about the transferring between accounts, and simply do the method with book cost I explained about.
If you had any experience in this I would appreciate it! Its hard to find people who use Qtrade and the CS is no help.
Hi Taylor. I have tracked the gain or loss with DLR and reported. It has honestly been a wash over longer periods of time. It would not be 10000US to 12000CAD = 2000 gain. It would be 10000US of DLR.U say at 10USD/share for argument which is 12000CAD. That CAD amount would be the base cost. Then booked over to DLR and sold for 12CAD/share = 12000 CAD. In other words no gain or loss from the maneuver. Now, in real time there could be a small gain or loss from price fluctuations between the buying and selling. I track the capital gain/loss for equities separately. Hope that helps clarify. Great question!
I think I get what you are saying. Not sure how the CAD would be your cost base and it wouldn’t be 2000 in your pocket going from USD to a CAD account. Ill just clarify a bit. I originally transferred over all my money when the dollar was par. Now, say I bring back 100K to CAD. That is roughly a 21,000 gain. If I transferred this the traditional way would qtrade count that as a gain? If I did it your way, would that be a gain?
The ACB for capital gains or losses for Canadian tax purposes is always converted into CAD. Usually using the official Bank of Canada rate for the settlement date of the transaction. That rate is found on their website.
Using an instantaneous transfer, there is no gain/loss. Using Norbit’s gambit, there can be some gain or loss if the price of the dollar changes over the two day period that it takes to do the maneuver.
Not sure if we are talking about the same thing. I realize that there can be some variance when you are converting, but I am talking about the capital gain that you get on the exchange itself. If you have 1 million in a USD broker account and transfer it over to a CAD broker account, will you not pay tax on the capital gain for the exchange?
Foreign exchange loss/gains are taxable if it is a gain/loss of over $200. Here is link to the CRA site. Thanks for bringing this up. I have honestly never paid attention since I automatically track gains/losses by using DLR/DLR.U anyway. Thanks for stimulating the discussion – I learned something.
So is what you are saying is you have paid capital gain taxes through the conversion between the two, DLR/DLR.U? Im just trying to find someone who has transferred money back and forth so I can understand how Qtrade records these transactions (see my previous posts).
I see your previous post you wrote “Using an instantaneous transfer, there is no gain/loss. Using Norbit’s gambit, there can be some gain or loss if the price of the dollar changes over the two day period that it takes to do the maneuver..” So what you are saying is that there is no capital gain when I bring the money back? Are you sure? Have you done this before?
I track my capital gains for taxes via conversion of DLR/DLR.U. That has been pretty easy since it is a fund.
I have not done a straight money move like you are asking. What I said before “using an instantaneous transfer, there is no gain/loss” is probably not true for investment accounts. Sounds like you need to track the gain/loss the same for money as you would for a fund/equity. Seems it would be an extra pain in the butt to track.
Very true. Although I think you said you had a large amount (in the 100,000s) that you transferred over? If that’s the case you would have had a capital gain in the 20K range and should have seen if that’s something you had to pay or not?
My accountant is now saying that brokers don’t report currency transactions in and out of account from USD to CAD. I find that hard to believe. They certainly haven’t tracked it when I have lost money going to CAD TO USD though…
I have transferred very large sums using Norbit’s Gambit. However, honestly the effect of gains or losses from currency changes has been very little so far. The amount that I did straight transfers for was a long time ago and fairly minimal. I have never had an issue. Personally, I would go with whatever my accountant said to do. I have tracked my gains/losses for the last five years or so, but I have also had the same accountant since my business inception and he tracks my gains/losses for me using my statements when he does my taxes each year.
Just wondering how the gains/losses were minimal on large amounts? 100K USD to CAD is roughly 25K in exchange. Thats a lot.. I would think you would notice taxes on 25K.
USD and CAD are not the same asset. Think of it as buying or selling USD. All adjusted cost base is converted to CAD for calculation of a gain or loss. So, the exchange rate itself is not a gain or loss. If you convert 125K CAD to 100K USD. The ACB is 125K CAD. That was not a gain. If you then convert that back to CAD later and the exchange rate is better so that the 100K USD gives 130K CAD, then the gain was 5K CAD realized at that. It is the difference in exchange rates between the buying and selling of USD that matters. Not the exchange itself.
I would love to say I made large purchases of USD at par and then sold them now. However, I did not. Most of my transactions have had minimal fluctuation of the CAD:USD exchange rate between the buying and the selling of the USD. So, not much gain or loss. If you did buy USD at par back around the financial crisis and sold them back to CAD now, then yes you would have a large capital gain.
Yes, thanks. That is what I was trying to get out of you. I converted my money when it was PAR and transferred some over relatively recently. My question is with Qtrade. I did not get a capital loss shown via Trade when I took a loss. I have spoken to a tax advisor and he says brokers don’t report this conversion. So how did Trade show it in you tax documents when you took your small gains? Did you do this all with this method and it somehow lumped it together with your DLR trades? If so, it would be hard to separate out whether they did or did not nab you with an exchange rate gain/loss/
I actually haven’t seen anything in tax documents either. I use MD Direct which is powered by Qtrade, but slightly different interface. For tracking capital gains and losses, I actually use an excel spreadsheet that calculates the ACB and gains/losses. I can download my account history as an excel file that I sort and then paste the transactions into my spreadsheet. I treat DLR/DLR.U like any other ETF. Using an ETF like that actually has made it very simple to track. I have no idea how you would track CAD/USD direct conversions – especially when the first transaction was over a decade ago.
I just learned about this method today. My children have some money to invest from their grandparents. In your article you mentioned using this method in an RRSP account.
Would this still be worthwhile for a non-registered account?
Hi PHW. The main reason to use it in a non-registered account is if you really want to use a US-listed ETF that doesn’t have a Canadian equivalent or the Canadian equivalent has a way higher MER – making it worth the hassle. In a non-registered account the US foreign withholding tax gives a tax credit whether it is a direct US ETF or a Canadian wrapper that holds the US version.
Thanks for the reply. With my son, I made the mistake of using a CAD account to purchase USD ETF’s and stocks with the exchange rate when purchasing the USD shares in the CAD account.
For my daughter, I was going to setup a USD account. When I heard of this gambit, it made me wonder if this method would save on exchanging CAD to USD to then purchase some US shares.
I see. Perhaps my accountant was right then. Qtrade and other brokers don’t track these currency gains/losses.
What is the purpose of using this other broker that links into Qtrade?
It is just the way the discount brokerage arm of where I have my money (MD Financial) works. Purely convenience (and the customer service has been very good in my experience).
So its a discount brokerage arm connected to a discount broker (qtrade)?
Yes. I it is MD Direct which is the DIY arm of MD Financial. It is a Qtrade platform with MDF customer support.
How do you go about linking your account?
It is automatic. It is just the way the MD Direct works.
I see. Never heard of this MD financial or MD Direct. I should be able to do all the steps listed above with just Qtrade?
Yes. Qtrade works exactly the same.
Okay thanks for you all your help! I guess Ill see how it goes.
No problem and goodluck!
Thank you for the post!
Just to clarify, in order to do the gambit I would need both a CAD RRSP and a USD RRSP? I currently trade with Questrade and I have CAD and USD ETFs in the same one RRSP account (I.e. VUN.TO, AMZN, GOOGL, XIU, VCN.TO, etc.). Could I sell my VUN.TO shares and buy the USD equivalent ETF in the same RRSP account?
I am not as familiar with Questrade, but I believe that they use one account with a USD and CAD side to it internally. Scotia iTrade is similar which I have used extensively. Qtrade went with separate accounts which is clean. The process is similar, but I believe with Questrade you may also need to change the currency settlement to USD when selling something USD in the account management section and then back to CAD when selling something in CAD. In terms of VUN.TO, I think that you should be able to buy DLR journal it to DLR.U in the RRSP and then sell DLR.U is $USD and then buy VTI (the US version). Big fee and FWT difference.
Thanks to you, I’ve successfully used the gambit multiple times. I like saving money!
A perhaps unrelated question, but you’re very knowledgeable.
So I have all these QTrade USD accounts (which routinely generate USD in dividends) and I’m beginning to think about the decumulation phase.
So clearly I could use the gambit to move USD back into CAD where I can more readily make use of it.
But on the other hand, I vacation a lot in the US so I opened up a USD bank account with CIBC, and now have a shiny new USD credit card from the same bank.
But I haven’t figured out a way to easily move money from my USD accounts with QTrade to my USD denominated bank accounts with CIBC. There seems to be no online way to download a void cheque (or would that be ‘check’?) from CIBC’s USD bank accounts which is necessary for QTrade to make the EFT link.
I suppose I could order checks (whaaaa? paper?) and do it the old fashioned way, but this seems way more complicated than it needs to be. And even then I’m not sure there’s not some kind of AML regulation that will prevent this.
We have done that actually. We linked our Qtrade USD account to our USD bank account (TD). We use that and a USD credit card for vacations and USD purchases. We had to order cheques to set it up (the rest of the cheques now sit in a drawer – stupid, I know). For my corp, I was able to order visually impaired cheques for free. For my personal account, I had to order some regular ones. They must be personalized with your name printed on them (no penciled in). Qtrade also has a new way to link accounts where you “Connect To Financial Institution” directly – I put some screenshots here. It will get you to log in to your online banking portal and then link directly (no cheques). I haven’t tried it with a USD account because this feature just came out and I was already set up.
Great, I saw the “Connect to Financial Institution” option as well but was (a) unconvinced it would let me link my USD account and (b) made me a bit leery since this feature involves a third party I know nothing about.
It seems (still TBD) that a stamped direct deposit form from my branch should be an acceptable (and nearly free) way to achieve the same result as physical cheques. I’ll report back!
Thanks Rob. A report back on how it goes would be helpful.
A void cheque isn’t the only thing Qtrade will accept: see here.
I use Wise (an international but UK-based money transfer/currency exchange service with low charges/no spread) for currency exchanges and just tried to link my Wise USD account to Qtrade. After a bit of to and fro, Qtrade told me that they can link only to Canadian banks.
So it’s back to Norbert’s gambit for me — which appeals to me intellectually, but is a bit tedious.
I’ve appreciated this blog post and discussion, though.
Thanks Adam. That is helpful. I have used Knightsbridge currency exchange before. Was decent, but I can actually do Norbert’s Gambit in less time than it takes me to do their paperwork now (plus costs less).
A few updates.
1. I was able to successfully link my USD QTrade Investment account with my CIBC USD savings account. (Not to be confused with the CIBC USD Smart Checking account). A payroll form from the bank that was stamped was the required no-cost magic piece of paper. So no need for ordering real-world checks.
2. I set up an account on Interactive Brokers (thanks again LD) to facilitate quick FX changes, and avoid the tax-time calculations imposed by the gambit. It appears that linking between IB and my CIBC USD savings account will proceed without issue and without forms (!). It takes a few days to set up, though, as the initiation process relies on making some test deposits to your linked bank account.
3. The aforementioned USD Smart Checking account from CIBC seems useful for transacting in USD, but I can see no easy way to put USD funds into it…If you routinely got USD checks from an employer i can see the attraction, but putting money into it is otherwise dependent on CIBC FX rates, which as we all know, are not very competitive.
4. However, both the USD Smart Checking account *and* the USD Savings account can be linked to your Canadian bank card so online transfers in USD without FX between the two is possible. That means you can actually set up (a) a USD bank account that can be linked to QTrade/IB while — that’s the USD Savings account and (b) have a means of cheaply transacting in USD (that’s the USD checking account) and (c) having a means of moving funds between the two.
All this to say, I now believe it’s possible for a Canadian citizen to transact in USD without expensive currency exchanges. But it will take a fair bit of effort to set up.
Thanks for the update Rob. That is very helpful!
You stated, “I set up an account on Interactive Brokers (thanks again LD) to facilitate quick FX changes, and avoid the tax-time calculations imposed by the gambit.”.
Can you explain what you mean by the “tax-time calculations imposed by the gambit”? I have done several Gambits over the last year but I am not familiar with the tax implications you are referring to.
Good question Rob. Technically buying and selling DLR and DLR.U could realize a slight capital gain or loss since you are buying and selling a security. This only matters in a tax-exposed account. The other Rob was talking about a taxable investment account because he uses this to get spending money in USD. It doesn’t matter in an RRSP or TFSA. The RRSP is where Norbert’s Gambit is most useful (to buy US listed ETFs and save on foreign withholding taxes).
If a taxable account, you would need to calculate the capital gain/loss that happens from the currency fluctuation over the few days it takes to do the Gambit. For example, I may buy 10 shares of DLR for $100CAD and then did the Gambit and sell DLR.U for $80USD a couple days later (and that converts to $105CAD just for the illustration). The value of the dollar changed a bit over the two days and resulted in a $5 CAD capital gain. In the end, you will randomly have slight gains or losses when you change currencies. So, not really a tax implication in the long run. However, you do need to track the gains/losses for taxes. Some years you could pay some tax and others you would save on tax. An extra admin task.
On the plus side, the transaction fees are considered a business expense. So, the government is essentially subsidizing your currency exchange fees 🙂
Thanks very much LD!
The gambit, if performed in a non-registered account, could generate a capital gain. By the rules of CRA, it cannot generate a capital loss, since you need to hold an asset for 30 days in order to claim one.
I’ve only used the gambit in my registered accounts (TFSA and RRSP).
This is getting pretty technical, but the superficial loss gets factored into the adjusted cost basis. So, if you sell all of your DLR, then you can report the loss. It isn’t a one-way ratchet. It is a real mind-bender, but it isn’t usually a problem since with the Gambit we tend to do it once in a while and sell the whole holding.
Thank you for this article. Are the steps still relevant today (March 2023)?
Yes. Nothing has changed that I am aware of. I last did it a couple of months ago.
Is it currently possible to use Norbert’s Gambit in a TFSA with Qtrade? I currently only have a CAD TFSA with Qtrade and I would need both a CAD and USD TFSA. Does Qtrade currently offer USD TFSA accounts?
It is possible to do Norbert’s Gambit within Qtrade. Same process, but you would need to open a CAD and USD TFSA (they have them both available).
Hi Mark (and others),
Thanks for the post and for being so active on the comments. I have read through everything, but I’m still not clear on the exact mechanics of RRSP vs TFSA vs non-registered CAD accounts to USD accounts.
I am early in practice (not incorporated yet) and used up a large amount of my RRSP contribution last year to lower my taxes payable. I also sold off all of my TFSA to cover some expenses. I have just starting using Qtrade, and I have all my RRSP money invested in XGRO.
I travel to the US regularly and would like to get US credit cards, so I’m learning how best to optimize CAD:USD exchange as spending money. For example, let’s say I go to the US for a week on a trip. I spend $5000 on my US credit card. Is the workflow for me to pay that balance from my CAD checking (i.e. income direct deposit) –> QTrade CAD RRSP –> DLR –> DLR.U –> QTrade USD RRSP –> USD checking (RBC; still haven’t figured out which RBC USD account is US domiciled) –> US credit card payment? Doesn’t contributing to the CAD RRSP and then selling it from the USD RRSP have tax implications? Should I just use a non-registered QTrade account for my purposes?
Thanks in advance!
I wouldn’t take money out of the RRSP for personal expenses (until retirement or unless a really low-income year perhaps). You can’t put it back in and lose that tax-sheltered space and have to pay tax. We use our non-registered accounts. A TFSA would also be ok as long as you wait to the next calendar year to put the money back in.
In terms of moving money between a Qtrade CAD and USD RRSP, there is no tax implications. It is RRSP to RRSP. Same with TFSA to TFSA. RRSP to non-registered would trigger tax and lose RRSP space.
We have two ways we use our non-reg accounts. We have a CAD and USD Qtrade corporate accounts for our corp and they are linked to a USD and CAD business acccount at TD bank. We can do Norbert’s Gambit in the Qtrade accounts and then from them to the same currency bank account. It is a bit messy because we need to give a USD dividend from our corp to spend personally. The better way (and the one we now use) is to just use our personal accounts.
We have a Qtrade CAD “cash” account (just a regular non-reg personal account) and a USD one. We do Norbert’s Gambit in there. The Qtrade CAD is linked to our personal TD CAD bank account. The Qtrade USD is linked to our USD personal bank account at TD. We just transfer in the same currency from the QTrade to TD account. You use the “transfer funds” section of the Qtrade site and do “electronic funds transfer“. We often do chunks of $10-20K just to save the effort and because we spend a lot of USD travelling.
Okay, that makes sense, thank you!
My next question is: what is the point of doing the RRSP:RRSP maneuver at all then..?
The point of doing the RRSP to RRSP maneuver is to buy US-listed ETFs. Canadian listed (CAD) ETFs that hold US ETFs have an extra layer of foreign withholding taxes compared to holding the US-listed ETFs directly. It is about a 0.4%/yr difference for a CAD vs USD ETF covering the US total market.
For Non-North American market coverage, it can be significant too. However, XEF and XEC are Canadian-listed and hold the foreign stocks directly for developed and emerging markets respectively. Their fees are slightly higher, but they save on the FWT making it extremely close and convenient since saves on the need to do currency exchange.
I have a question about moving money from US back to CDN.
I am a resident in the US planning to move back to CDN after residency. Would I still be able to pull of this gambit?
I anticipate having ~80K USD at the end of residency. Is this the most efficient way to move the money back to CDN?
It is a good question. There are a couple of good options. One would be to open a USD and CAD Qtrade (or other discount brokerage) account, move the USD in the USD account and do Norbert’s Gambit. That is a bit more complex, but if you plan to invest that money, then you’d want accounts anyway. If you just want the money to spend, then the simplest option would be to open a CAD bank account and then use an exchange service like Knightsbridge to move it from your USD bank account, convert it, and deposit in your CAD bank account.
What I wouldn’t do is use a bank’s exchange rate. You’d get hosed.