How to use “Norbert’s Gambit” to exchange Canadian for US funds

You will need to already have a Canadian dollar account and a US dollar account in your web broker (or whatever you use to trade stocks). If you don’t have this, call you broker (in my case, TD Direct Investments using TD Webbroker) to have them set this up.

Let’s begin:

Start in your Canadian account on your web broker (or whatever you’re using) and buy DLR (with a Canadian flag, or DLR.CA sometimes). For amount of shares, divide the amount of CAD you want to convert by the ask price for DLR (with a Canadian flag). For example, I want to exchange $10,000 CAD so I calculate 10000 / 12.81 = 780.64. I take off the 0.64 because you can’t buy fractions of shares (in other words, I will be exchanging a bit less than $10,000 CAD. If I needed to deal with “at least $10,000,” I would round up instead of removing the 0.64.

When you “preview” this stock order, it will give you the total CAD it will cost you (which in my case is less than $10,000 CAD).

Basically, at this point you have essentially bought USD. That means that whatever happens with the value of USD (it might go up or down against CAD), you have that money as USD. If USD goes up after you buy DLR.CA, you gain value.

Once you buy the stock, you must wait (3 business days after you place the trade, usually). After that time has passed, call your broker (in my case, TD Direct Investing at 1800-465-5463, because I’m using the TD Waterhouse web broker platform). Ask them to transfer or “journal over” 780 shares (in my case) of DLR from your Canadian dollar account over to your US dollar account.

Once that is complete, you will see 780 shares of DLR (with a US flag, or DLR.U, or DLR.U.CA) in your US dollar account. You simply sell this stock, and you wind up with the value of the stock in your US dollar account to use (in this case, around $7792 USD, because USD is more valuable than CAD right now).

Pros of Norbert’s Gambit: No exchange rate (you didn’t “convert” your money). You don’t lose 1 or 2 or 4 cents per dollar like you would if you just “bought” US dollars with your Canadian dollars.

Cons of Norbert’s Gambit: You do pay the “ask” price, which is around 1 cent higher than the buy price, so you lose a bit of money that way, and the same thing when you sell. Also, it takes 5 days or so sometimes, so you don’t get to use the USD until next week, maybe. You also pay the trading commission (with TD Waterhouse, it’s $9.99 CAD per trade, so almost $20. Also, you need to have a Canadian and US trading account.

So what are the costs of doing Norbert’s Gambit?

Shorthand answer: For an amount around $10,000, it will cost around $30-$50. Here’s the math, followed by the explanation. Note: I’m going from CAD to USD.

$10,000 USD = $12,800 CAD. Add $40 CAD ($9.99 + $9.99 + $20) = $12,840 CAD

Let’s say you want $10,000 USD. Currently, $1 USD is worth $1.28 CAD. We need to spend $12,800 CAD plus our trading fees (that makes $12,820), plus the small amount we lose (1 or 2 cents on each share) when we buy and sell the stock at the offered-asking prices, which add in a minute.

We figure out how many shares we want to buy (today, each share is $12.77 CAD): 12820 / 12.77 = 1003.9. I’m rounding up in this case to 1004 shares. I have to add (an estimated) 1004 shares x .02 (I add 2 cents per share instead of 1, to be safe on my amounts) to cover what I’ll lose on the offer-ask spread for the stock buy and then the stock sale, and therefore need to add $20.08 CAD total to the amount I’m going to spend. So now I go back and add $20.08 CAD to the amount of CAD I have to start with: I now have to start with $12,800 plus $20 commission (for 2 trades) plus $20 for loss on the offer-ask (for 2 trades). This means I need $12,841 CAD (added $1 to cover those extra cents I rounded off) to end up with $10,000 USD, which USD is worth $12,800 CAD after I lose around $40 CAD to complete the process.


I would like to thank Justin Bender CFA, CFP, B.Comm., Portfolio Manager at PWL CAPITAL INC., who helped me in understanding some of the finer points of the Norbert’s Gambit process. He has a very useful YouTube tutorial here.