Toronto Team  

  • T416.203.0067
  • 1.866.242.0203
  • F416.203.0544
  • 8 Wellington Street East
    3rd Floor
  • Toronto, Ontario M5E 1C5

Norbert’s Gambit at TD Direct Investing

March 6, 2017 - 45 comments

US-listed ETFS are the most tax-efficient way to invest in foreign equities within your RRSP account.  The funds also tend to have lower annual fees than Canadian-listed ETFs.  However, they must be bought and sold in US dollars, and if you have to exchange your Canadian dollars for greenbacks, it can be extremely costly.  Many discount brokerages charge about 1.5% – or a whopping $150 on a $10,000 conversion.  If you’re going to use US-listed ETFs, you need to find a way to mitigate these high costs.

If you need to convert loonies to US dollars, I’ll show you a technique that can save you hundreds of dollars per transaction.

Introducing Norbert’s gambit

Savvy DIY investors have long used a technique called “Norbert’s gambit” to sidestep these steep currency conversion costs. The name comes from Norbert Schlenker, an investment advisor in B.C. who was the first to popularize it.

Norbert’s gambit with DLR and DLR.U

The simplest way to do Norbert’s gambit is with the Horizons US Dollar Currency ETF.  This ETF – which is equivalent to holding US cash – is available in two versions.  Both trade on the TSX, but the first, with the ticker symbol DLR, is bought and sold in Canadian dollars, while the second, DLR.U, trades in US dollars.

You can use these ETFs to exchange Canadian dollars for US dollars and then use the proceeds to buy US-listed ETFs.  Norbert’s gambit can be confusing, so I’ve put together a video tutorial that you can follow along with.  For more information on this strategy, please refer to our white paper.

Note: TD Direct Investing began offering US dollar RRSP accounts shortly after our white paper was published, so please refer to the video tutorial below for the updated Norbert’s gambit procedure.


By: Justin Bender with 45 comments.
  07/05/2018 4:25:13 PM
Justin Bender
@Susan: I would call TD Direct Investing to confirm, but you should be able to move them to the US dollar side of your RRSP account, and sell them there (where they would settle in US dollars). Then, you would use the Norbert’s gambit strategy (but in reverse, buying DLR.U in your US dollar account and selling DLR in your Canadian dollar account) to convert the US dollars to Canadian dollars). If the amount is small though (less than $3,000), it may not be worth it.
  07/05/2018 4:19:01 PM
Justin Bender
@Trevor Metzger: The moment you buy DLR, you immediately have US dollar exposure. When you sell DLR.U (and your RRSP account now holds US dollars), you still have exposure to the US dollar. If you buy a US-listed ETF that invests in US equities, you still have exposure to the US dollar. If you buy a US-listed ETF that invests in international or emerging markets equities (like IEFA or IEMG), you no longer have exposure to the US dollar (even though the ETFs are priced in US dollars).
  30/04/2018 10:16:19 AM
Trevor Metzger
Hi Justin:
I am new to Norbert's gambit but have done it twice in April 2018 with my TD Direct Investing RSP account.

I would like to report my experiences in asking them to transfer (journel) DLR from Canadian to US side of my RSP.

The first time they just did it.

Today a friendly TD rep engaged me in a conversation. He basically asked if I was trying to do a "Norbert's Gambit". I said that I was. He explained that what they often do (and are willing to do) is:

1) Have me buy the DLR on the Canadian. This part is the same.

2) Then I could call them within minutes and they could journal and sell DLR.U on the US side immediately. If I understood correctly I would be "short" for a bit (until the transactions all settled).

He explained that he was offering this same day suggestion so that I wouldn't have the risk of the foreign exchange moving unfavourably while I was waiting for the T+2 settlement time.

But he was also seemed to be OK with me just waiting the T+2 days and then me just asking to just journal it. If I understood him correctly he thought that I would then be risking a currrency movement in those settlement days. So he was offering his suggestion (for the future) to eliminate this risk while waiting T+2 to settle.

I politely questioned/challenged him a little bit. He did admit that some of the reps might (and could) charge $43 for the same day US side sell transaction that he was suggesting.

I also tried challenging a bit on the foreign currency movement risk. Correct me if I am wrong but it seems to me that my risk is only when buying DLR on the Canadian side. That DLR price flucuates to follow the US to Canadian dollar rate. But when I go to sell it (as DLR.U) it seems that that price always remains within a cent or two of $9.96. So I don't see a second price movement risk on the US sell side. Contrary to what the rep seemed to be saying, I don't see a foreign exchange risk in waiting the T+2 days for Canadian side DLR purchase to settle.

Am I understanding this correctly? Am I missing something? Did I understand the rep correctly? I believe that I understand Norbert's Gambit but a bit of confirmation would be appreciated.

  24/04/2018 11:12:50 AM
Justin Bender
@AC: I haven’t heard anything online, but they may have stopped allowing it (I would call back and speak with a few reps before jumping to any conclusions). Also ensure that you are calling on the settlement date of the trade (not immediately after placing your trade).

If they are disallowing Norbert’s gambit, you may want to consider voting with your wallet and switching brokerages.
  17/04/2018 10:18:35 AM
Justin Bender
@Louise: I haven’t heard that TD has changed their policy on Norbert’s gambit (although you do have to wait until the settlement date to call them to transfer the securities – perhaps you called on the same day as the DLR purchase?). Sometimes you will get a confused TD rep – I would just hang up and try calling again later.
There’s no foreign withholding tax benefit of converting Canadian dollars to US dollars in a non-registered account to purchase US-listed ETFs (the US-listed ETFs are slightly cheaper, but I don’t feel that it’s worth the hassle) – you also may have to deal with pesky T1135 reporting.
  16/04/2018 6:45:23 PM
How do I sell US money market funds and change them into CDN dollars in my RRSP and TFSA accounts without incurring currency charges?
  13/04/2018 11:15:43 AM
I'm talking to a rep from TD for this and he said there's a charge of $27 to perform this. Do you know if they've changed the policy or is he just bs'ing me?
  12/04/2018 8:21:32 PM
Hi Justin,
Thank you so much, and i used what you taught did several times currency exchange in RRSP account.

However, when i tried to exchange currency this week, i was told the rule changed, can not do in any register account anymore. So may i ask if use this method to do in cash/non-register account, may i ask what is the disadvantage?
Also, is there any good way if still want to exchange currency in Register account

Many Thanks
  19/03/2018 11:51:39 AM
Justin Bender
@Nicholas: Yes, the process can be done in reverse - you would buy DLR.U with your US dollars and sell DLR.
  09/03/2018 1:00:47 AM
Hi Justin, can this process be done in reverse, converting USD to CAD? Asking specifically for Cash Accounts with TD. Thanks!
  27/02/2018 2:55:49 PM
Justin Bender
@Fred: TD Direct Investing does not charge a brokerage fee to move shares from one account to another. The entire process should cost two trading commissions (one at $9.99 CAD and the other at $9.99 USD).
  23/02/2018 11:35:20 AM
Hi Justin...A follow question from above...when you call TD D I to move DLR shares from Can. to US RSP account, does TD charge a brokerage fee.? My understanding of NG is that it should cost you the equivalent of two transactions at a discount brokerage. Please clarify
Thanks for the support
  06/02/2018 11:52:40 AM
Justin Bender
@Sabrina: The only risk is if exchange rates move significantly while you’re waiting for your purchase of DLR.U to settle (before selling DLR). But generally, using Norbert’s gambit to convert $20,000 USD to CAD is one of the cheapest options available to retail investors.
  04/02/2018 3:10:21 PM
Hi Justin
I have approximately $20,000 USD that I would like to convert to CAD. I have a TD DI account. Is there any downside to suing Nobert's Gambit to simply exchange USD to CAD dollars?
  17/01/2018 9:45:35 AM
Justin Bender
@Wayne: For more information on foreign withholding taxes, please refer to my white paper on the subject:
  11/01/2018 9:26:08 AM
In one of the comments the "foreign withholding tax drag" comes up. Is this relevant when you are trading DLR and only holding it for a short period?

Am I correct that withholding taxes are only an issue if you are holding the ETF on the ex-div date? If I am not correct then how does this work?
  24/11/2017 5:31:01 PM
Justin Bender
@steven: You should speak to your advisor regarding this question.
  15/11/2017 3:06:31 PM
Suggestions on trading in the US? Canadian bank has restricted my trades since moving,
  10/11/2017 11:01:59 AM
Justin bender
@Rob: I’m not sure which calculator you are referring to, as I didn’t post one on this blog. Is it your computer’s calculator?
  04/11/2017 3:44:32 PM
Something is wrong with the calculator. Try to enter DLR or DLR.U amounts and they disappear. Possibly a bug in the code?
  26/09/2017 4:49:48 PM
Justin Bender
@iraj rezaei: You can generally perform the Norbert’s gambit strategy in both RRSP and non-registered accounts. In my video tutorial, I used an RRSP account as holding US-listed ETFs within an RRSP account mitigates the foreign withholding tax drag.
  13/09/2017 4:20:07 PM
iraj rezaei
Hi Justin,
I just called TD , they told me I can do Norbert's Gambit at non registered account but I your video show I can do it at RRSP account, can you clarify please?
  05/09/2017 1:45:25 PM
Justin Bender
@Guillaume: Unfortunately, I do not hold a Disnat account, so I am unfamiliar with the account procedures there.
  03/09/2017 4:52:38 PM
Hi There,

Any idea if this can be achieve for non-registered accounts with Disnat? Thanks in advance!
  28/08/2017 11:12:06 AM
Justin Bender
@Kelly: Unfortunately, I have no experience with this type of transaction. Are you able to set-up CAD/USD brokerage accounts in the US and wire the CAD cash to the Canadian dollar account (and perform the gambit with inter-listed stocks instead)?
  28/08/2017 11:11:31 AM
Justin Bender
@Daniel: I’m glad you’ve enjoyed our online resources J

In regards to your questions:

1. Holding US-listed ETFs in RDSP accounts does not mitigate the foreign withholding tax drag (probably best to just think of the RDSP account like an RESP or TFSA account):

2.If you purchase foreign equity ETFs (whether they are US-listed foreign equity ETFs or Canadian-listed foreign equity ETFs), you have a long position in the underlying country currencies (USD, GBP, AUD, etc.). If the Canadian dollar appreciates relative to these underlying currencies over your investment horizon, you will have a lower return in Canadian dollar terms (the reverse is also true).
  21/08/2017 8:45:02 PM
Hi Justin - any idea how this should work for a Cndn citizen but US resident alien for tax purposes (non-green card holder)? I'm looking to convert CAD to USD from my TD non-registered account however as a non-resident in Canada my non-reg accounts are frozen - I can only sell. I'm guessing this means I cannot use this Gambit but wondering if you know of options... Thank you!
  03/08/2017 3:01:41 PM
Hi Justin! First off, I want to thank you and Dan for putting so much time into everything - your white papers, blog posts, etc. - these resources have helped me immeasurably!

I have two questions, hopefully easily answered, as I'm an investing newbie.

1) Does everything we've read about Norbert's Gambit - reducing currency conversion fees, avoiding withholding taxes in my RRSP because the ETF is now U.S. listed also apply to my RDSP (Registered Disability Savings Plan). In addition to my RRSP investments, I'd like to use N's Gambit in my RDSP and invest in ETFs that are U.S. listed to avoid withholding taxes.

2) I understand, as you've clearly outlined, that there is currency risk during the settlement period following Norbert's Gambit. Isn't there also long term currency risk between the initial purchase price and then reconverting back to CAD when I'm ready to retire and start pulling on these funds? E.g. if the CAD has appreciated in 30 years, I would lose out there as well no? Dan mentioned fully appreciating the full implications of this before proceeding, any help would be greatly appreciated!
Thanks Justin.
  24/07/2017 4:16:00 PM
Justin Bender
@Andreas: Purchases and sales of DLR and DLR.U settle on T+3 (soon to be T+2 in September 2017). However, at RBC Direct Investing, you can immediately buy DLR, sell DLR.U, and buy your US-listed ETF (as all trades will settle on the same day, as long as there are no differences in stock market holidays between the Canadian and US stock markets).

If you are planning to withdraw the US dollar proceeds from the sale DLR.U, you will have to wait until the settlement date to access the funds.
  20/07/2017 3:31:05 PM
Just a further warning about that 3 day settlement period. In the 3 days I've had to wait, I've already got an unrealized loss of nearly $1400 due to the sinking US dollar. :(
I'm going to now transfer the shares to my CAD account, but I think I have to wait now for the US dollar to recover somewhat, but not even sure if that's going to happen any time soon!
This is my first time utilizing Norbert's gambit. It's not quite as stress free as I thought it would be. And I'm not sure I would advise doing this in TD at all due to the T+3 period.
  20/07/2017 12:14:06 PM
Hi Justin, I just spoke with RBC direct investing and they are saying settlement in 3 days as well... he said it's the market that sets that rule. Am I missing something??
  14/07/2017 10:54:16 AM
Justin Bender
@Ezio Bobbato: Once you purchase DLR, you are immediately exposed to the US dollar (if the US dollar appreciates relative to the Canadian dollar during the T+3 settlement period, you win – if it depreciates, you lose). There could also be an opportunity cost for waiting to purchase the US-listed ETFs. If equities increase during the settlement period, the missed opportunity may offset any benefit from the cheaper currency conversion (the opposite is also true). This is why I prefer implementing the gambit at brokerages that allow you to complete all of these steps on the initial day (RBC Direct Investing is an example of one).
  13/07/2017 2:53:19 PM
Ezio Bobbato
Hi Justin,
Just viewed your YouTube tutorial (excellent work) but have the following questions:
1. Given the T+3 settlement delay following the purchase of DLR, is there an exposure to price fluctuations that could affect the net proceeds when selling DLR.U or is this a minor issue?

2. When you request to move DLU shares from the Canadian dollar account to the associated US dollar account, will TD do this free of charge or is there a fee involved?

  07/07/2017 4:47:58 PM
Justin Bender
@Maria: I’ve never attempted the gambit in a US brokerage account (I assume the steps would be similar). If you are planning to open a non-registered Canadian brokerage account (with CAD and USD sides of the same account), you could set this up first and then wire the funds from your US bank account to the US-dollar side of your new Canadian brokerage account (and then implement the gambit by buying DLR.U in your USD account with your US dollars and selling DLR in your CAD account).
  05/07/2017 4:07:05 PM
Thank you very much for this informative article. I have USD in a US-based bank account - do I need to move it into a Canada-based USD account first to do Norbert's Gambit? I am new to this and need to exchange a large amount. Thank you in advance!
  29/06/2017 11:14:48 AM
Justin Bender
@Serge: It doesn’t need to be an RRSP account (non-registered and TFSA accounts work as well). The main benefit to holding US-listed ETFs in an RRSP (which require US dollars to purchase them) is a reduction in foreign withholding taxes:
  29/06/2017 1:14:06 AM
Why does it have to be an rrsp account? Would there not still be benefit in doing this even if it's a regular trading account?
  28/06/2017 1:37:29 PM
Justin Bender
@Tony: Nobert’s gambit can be implemented in reverse – you would simply buy DLR.U in your US dollar RRSP account, and sell DLR in your Canadian dollar RRSP account. Before selling your US stocks, please ensure that you have a US dollar RRSP open and that the US stocks have been transferred to the account (if they are held in a Canadian dollar RRSP account, there will be a forced currency conversion at the higher brokerage FX rates when you sell them).
  28/06/2017 1:02:34 PM
Hi Justin,

I have large amount of US$ and US stocks in my RRSP and would like to convert to C$ in anticipation of withdrawing.
Can this technique be used in reverse?
Thank you
  16/05/2017 4:20:22 PM
Justin Bender
@Barry: Holding XAW would have similar foreign withholding tax implications as holding US, international and emerging market equity US-listed ETFs (with the exception of international equities, as XAW holds XEF, which holds the underlying stocks directly and is therefore more tax-efficient than holding IEFA in a taxable account).

The main benefit of holding US-listed ETFs in a taxable account would be their lower expense ratios (but you have to weigh that benefit against the complexity and cost of converting CAD to USD).

In an RRSP account, the benefits are relatively large (if you properly use Norbert's gambit to convert your CAD to USD). In a taxable account or TFSA account, the benefits are smaller (I generally do not hold US-listed ETFs in TFSA or taxable accounts).
  16/05/2017 3:05:45 PM
Mardi's question: I assume you could benefit on the exchange rate by using this technique, in either a registered or non-registered account. I think that is what she is asking about. The withholding tax issue is a separate one.
  20/03/2017 12:53:33 PM
Justin Bender
@mardi: The benefits of reducing the foreign withholding tax drag is more relevant in RRSP accounts (in TFSA accounts, holding US-listed ETFs does not avoid the problem, and in taxable accounts, the foreign withholding tax drag is similar - with the exception of holding Canadian-listed international equity ETFs that hold the underlying stocks directly).

For more detailed information, I would recommend reading our white paper on the subject of foreign withholding taxes:
  19/03/2017 4:56:53 PM
You say your calculations are based on the assumption that the ETFs are being held in either a tax-deferred or tax-free account. What if XAW is held in an open account--Canadian or US?
  14/03/2017 10:32:13 AM
Justin Bender
@David Scott: If you haven't watched the YouTube tutorial above, it walks you through the updated step-by-step process.
  09/03/2017 9:43:16 AM
David Scott
Hi Justin,
Re Norberts Gambit for TD, TD DI does allow you to have US cash in registered accounts now. How does this change the process for Norberts Gambit? Sorry, I'm new to this technique, don't fully understand it yet and I would appreciate your help with NG given the change at TD.

Thank you in advance,
David Scott

 Security code