Financial Literacy

Norbert’s Gambit: How to Convert CAD to USD and Skip the Exchange Fees

Norbert’s Gambit: How to Convert CAD to USD and Skip the Exchange Fees

If you convert large amounts of currency from USD to Canadian, or vice versa, Norbert’s Gambit is a clever technique that can save you hundreds, even thousands of dollars, depending on the amount of money you convert each year. In this article, I’ll explain what exactly Norbert’s Gambit is, and give you step by step instructions on how you can use it to save money on foreign exchange transactions (forex).

Exchanging Foreign Currency Through a Bank

Did you know that when you buy or sell foreign currency through your bank, you’re not actually receiving the market exchange rate? That’s because no matter which way you conduct the transaction – in a branch, over the phone, or online, your bank is adding anywhere between 1.5 and 3% to the exchange rate, and collecting that amount as their share for administering the transaction on your behalf. So, if you thought that foreign exchange transactions were free, think again. The problem is, any financial institution that facilitates forex transactions operates by the same principle. It’s how they make money. Thankfully, using Norbert’s Gambit, there’s a way for you to keep your bank on the outside looking in.

What Is Norbert’s Gambit?

Norbert’s Gambit is named after a gentleman by the name of Norbert Schlenker, of Libra Investment Management, a B.C. investment firm. According to online folklore, it was Schlenker who popularized the idea of leveraging the use of shares listed on both the Canadian and U.S. stock exchanges, as a way to save money on the spread charged by banks on forex transactions.

The idea is to buy shares of the stock on one exchange, then have a broker journal the shares over to the same listing in the foreign currency, at the market exchange rate, and then sell the shares in the currency you want to end up with. Theoretically, the only fees you would encounter would be any commission fees associated with the purchase and sale transactions. Depending on how much money you’re converting, they wouldn’t amount to much. These days, perhaps the most popular fund used in Norbert’s Gambit is the Horizons US Dollar Currency ETF. Let’s take a look at how this works using that fund.

Horizons US Dollar Currency ETF and Norbert’s Gambit

Horizons has made it much easier to execute a Norbert’s Gambit, by creating an ETF which is designed specifically for the task. Enter the Horizons US Dollar Currency ETF (DLR). This fund is listed on the TSX in Canadian currency (DLR) and American currency (DLR.U). The difference in unit price between the two funds closely reflects the global exchange rate between the Canadian and US dollar.

For example, on the day of this writing, DLR closed at $13.22 CAD, while DLR.U closed at 10.12 USD. This represents a CAD to US Exchange rate of 13.22/10.12 = 1.3063. I checked the global currency markets for the same day, and the mid-market exchange rate was at 1.3056. This means that the exchange rate you could receive using Norbert’s Gambit is almost identical to the global market rate. I say, ‘could receive’, because the price can fluctuate slightly between when you buy and when you sell. That said, providing you don’t delay, you shouldn’t encounter much volatility, as the ETF is invested primarily in cash and cash equivalents.

Using the above scenario, if I used Norbert’s Gambit to convert $20,000 CAD at the rate of 1.3063, I would receive $15,310.40 USD. Now let’s compare that with the exchange rate offered by my bank. To figure this out, I logged into my online banking and simulated an identical transfer of $20,000 CAD to USD. The rate quoted by my bank was 1.3205, a difference of almost 1.5 cents on the dollar.

Had I completed the same forex transaction through my bank, I would have received $15,145.60 USD, or $164.80 less than with Norbert’s Gambit. Even with the trading fee I would be charged for selling the ETF (approx $9.95), I’m ahead by over $150 using Norbert’s Gambit.

Who Should Use Norbert’s Gambit

Can you imagine how much money this would save someone who conducts large forex transactions on a regular basis? If you were someone who does a lot of business in the U.S., or you were making a major purchase in U.S. funds ie. a vacation home, or an expensive RV, you could save hundreds, even thousands of dollars, using Norbert’s Gambit.

Executing Norbert’s Gambit Using Questrade

In order to take advantage of Norbert’s Gambit, you’ll need a discount brokerage account. If you already have one, you’ll want to make sure it’s equipped to handle the transaction you’ll need to make. Thankfully, most Canadian discount brokers will work. If you don’t already have a discount brokerage account, I highly recommend Questrade for this purpose. Because it’s the only discount brokerage account I use (and the one I highly recommend), I’ll use it to explain exactly how to execute a Norbert’s Gambit foreign exchange trade. Here goes!

For this illustration, we’ll convert Canadian funds to U.S., using 4 simple steps:

1. Buy Shares of DLR.TO via Questrade

The first step is to buy the funds in Canadian dollars, by purchasing DLR. Begin by selecting “BUY”, then enter DLR in the appropriate field. You’ll need to figure out how many shares you need to buy, based on the amount of money you want to exchange. Thankfully, because you’re using Questrade, you won’t encounter any commission fees when purchasing DLR as Questrade does not charge commission fees on ETF purchases. That’s not the case with most discount brokerages.

2. Have Questrade Journal Shares To DLR.U.TO

After 2 business days, your trade will be settled. At this point, you’ll see the shares in your account. You can now reach out to Questrade via phone or chat support, to have them journal the shares over to DLR.U on your behalf.

3. Sell Shares of DLR.U.TO via Questrade

Once the shares have been journaled over, you are free to sell them. The idea is to sell the same number of shares that you had purchased a few days prior. Questrade will charge a trading fee between $4.95 (min) and $9.95 (max), on the sale of the shares. This will be the only fee you should encounter.

4. Transfer Your U.S. Cash

Once the sale transaction has settled (another 2 business days), you’ll have access to the U.S. dollars in your Questrade cash account. From here, they can be moved to U.S. dollar bank account, ready for you to use.

Speed Up the Process

As Jack points out in the comments, one tip to speed up this process is to buy DLR and sell DLR.U at the same time within a margin account. This allows the entire transaction to settle in two days and reduces the risk of currency fluctuations.

Things to Consider Before Doing a Norbert’s Gambit

Because you’re dealing with the stock market, there are some things you should be aware of before executing a Norbert’s Gambit. For starters, if the stock or ETF you’re using was to experience sudden volatility, the price changes could reduce or eliminate any savings you’re getting on the forex transaction. The Horizons ETF should reduce this possibility, but it’s something you want to be aware of.

Another consideration is the amount of money you’re dealing with. Obviously, the more you’re converting, the greater the potential savings. If you’re only exchanging a few hundred bucks, Norbert’s Gambit isn’t likely worth the effort. Lastly, remember that the process will take a few days. After your ETF purchase has settled, it’ll take a couple of days for Questrade to journal the shares over to the opposite currency. Because of this, you’ll want to plan your transaction in advance, to allow yourself enough time for the conversion.

Final Thoughts on Norbert’s Gambit With Questrade

As you can see, Norbert’s Gambit may be the only way to avoid the premium charged by financial institutions on forex transactions. And in my experience using Questrade, the process is very easy, once you try it a couple of times. You can open a Questrade account online and begin trading right away, or use a discount broker of your choice, just make sure they can journal the shares over for you. What’s great about Questrade is the no-commission fee ETFs. With only a small trading fee when you sell the shares, executing a Norbert’s Gambit with Questrade can result in a savings of up to 50% over other online brokers. Just like foreign exchange rates, it adds up.


  1. Jack

    Tom, just to clarify, DLR.U is not listed on the NYSE. It’s listed on the TSX but trades in USD. Also, if you have a margin account you should be allowed to purchase DLR and sell DLR.U (or vice versa) simultaneously and have them settle against each other in two days’ time rather than waiting to settle each side of the transactions separately. This will cut down a little bit on the risk that the currency moves in those two days.

    • Tom Drake

      Thanks Jack, making edits!

  2. Cheryl

    I did the Norberts Gambit using the DLR.TO stock and going through Questrade as in the step by step instructions above, a few weeks ago. After I did my initial purchase, I phoned Questrade and asked to journal to USD. So you can either ask as soon as you purchase (takes about 4 days to have the funds journaled into USD), or wait a couple of days for the purchase to complete, and then phone and ask, and it’ll take a day or two to journal.

    I’ve read where other people do a loose version of the Norberts Gambit where the ETF they want to purchase is available in both funds. They buy in Canadian and phone in to the broker to journal to US and they’re done.

  3. Ray

    Nice article!
    I have been using the process for years. It works as you discribed.

  4. Dividend Earner

    Works much better with RBC Direct Investing. I can buy and sell within seconds and the journaling happen automatically in the backend.

    With Questrade (yes also have an account), you have to wait 2 days for the shares to settle before you can sell – although I just read the comment about margin account so that’s interesting. You can also just chat or email to get the shares journaled.

  5. Robert

    Except; What other ETFs are available in both funds and have higher flow(easy sell/buy with minor difference)?

  6. Abid

    In regards to Jack’s comment above, wouldn’t buying DLR.TO and selling DLR.U.TO (or shorting) at the same time initiate a fee of some sort for shorting the stock?

    Can someone confirm?

  7. Sam

    Hi, I bought DLR.U to change my USD to CAD, How do you sell DLR.TO after you buy it under DLR.U? It says this security is not available to be shorted seems like you can’t buy and then sell right away, I am using a margin account, thanks.

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