I regularly use the Norbert Gambit approach to convert USD to CAD (and vice versa) through RBC Direct Investing. The process is smooth through RBC but not all discount brokers are created equals and you need to find out if your discount broker can support it.
Not all discount brokers are able to easily execute the Norbert Gambit. Make sure it can be done smoothly by asking your discount broker about the ability to journal the shares. What you need to understand with DLR and DLR.U is that they both trade on the Toronto Stock Exchange (TSX).
If your discount broker doesn’t support the process and it’s important to you, you can always consider switching discount broker. I have done it once and it was pretty simple to do. It just takes time for all the shares to be transferred.
Norbert Gambit Transaction Steps
Below are the 3 steps to exchange USD currency to CAD dollars using DLR as the ETF (Horizons US Dollar Currency ETF).
Step 1 – Purchase DLR.U on the TSX
Once the US currencies is in the account, initiate a purchase transaction of DLR.U.Make sure you choose the USD account to make the transaction. Note that it trades on the TSX and is in US dollars unlike other stocks that are dual traded between the NYSE and TSX.
A wise transaction tip is to always put a limit on your stock trades. I put my limit at $9.95 US and waited 2 days for all the shares to be purchased. The limit is up to you to decide on. I tend to pick the ask limit and that’s just to ensure I don’t pay more based on market transactions.
Step 2 – Sell DLR on the TSX
As soon as the transaction is filled, I initiated the sell of DLR in Canadian dollars for the number of shares I purchased. Again, I use a limit price of $13.35 CDN and I use the CAD dollar account to execute the transaction.
There was a warning of currency exchange rate when I put the sell order but I verified with RBC Direct Investing that there would be no fees. Since DLR.U and DLR are exactly the same ETF, there are no fees.
Step 3- Get Your Money
Unfortunately, you have to wait for the transactions to settle to withdraw the money from the account and it takes approximately 3 days. If you want to convert your currency from CAD to USD, you just need to purchase DLR first and then sell DLR.U.
If you pick the wrong account to make a transaction, you will incur an immediate currency transaction by the discount broker, double check the accounts you make the transactions from.
If you want to convert CDN to USD, just start with buying DLR and then you just need to sell DLR.U.
Norbert Gambit Results
I had great results and the rate is very competitive. I have tried local currency exchange businesses and also looked at xe.com.
Obviously, the cost of the transactions approximate to $20 and requires a decent amount to ensure you are not overpaying in fees. Otherwise going to your local currency exchange might be better. I am very pleased to use RBC Direct Investing and DLR for my currency exchange even if the total time is approximately 5 business days before I can access the money.