# TDW RRSP - Currency conversion vs. "the Gambit"



## avrex

*************************************************
*UPDATE* 2010-12-30. Click on the following link to take you to the end of this thread to see how I was able to 
successfully use the "gambit" to obtain US$ at the 'spot rate' and avoid the expensive currency fees.

*************************************************

*My Philosophy: *Buy and hold investor. Keep costs low via passive investing.
*Account:* TDW (Toronto Dominion Waterhouse) RRSP (this post will apply to TFSA registered accounts also)
*Goal: *Rebalance his portfolio. After 3-5 years of limited action, this sleepy potato has woken up and needs to rebalance his portfolio.


*Step 1*: Determine new target Asset Allocation. 
I've been looking at the various Couch Potato portfolios and I am now determining what the best allocation for my current situation is.
I haven't finalized my Asset Allocation yet, but so far it looks similar to Raven's target (which includes some of the Vanguard ETFs that are in US dollars)
*Step 2*: Sell the mutual funds that don't match up with my new target portfolio.
*Step 3: *Convert Canadian dollars within the RRSP to US dollars i.e. placing the US dollars in the TD US M/MKT U$ Mutual Fund (TDB166)
*Step 4:* Buy the newly targeted US currency ETFs.

For this post, I wanted to talk about *Step 3*. Convert Canadian dollars to US dollars. My estimate at this point, is that I'll need to convert about $100,000 to US dollars. It looks like there's only two ways to do it in the TDW RRSP.

*3 a) Currency exchange.*
I've seen different posts on what TDW's currency conversion might be for this type of amount. One was 0.6%.
Raven stated in his post,


NorthernRaven said:


> If I gambit (and since TDW doesn't seem to go below 0.3% spread I probably will) even if I do it in two or three chunks it is still a lot cheaper.


that TDW won't go below 0.3%.
For ease of illustration, I'll assume that the Cdn dollar is on par with the US dollar. This means for my 100,000 transfer, at the very best, it would cost me $300. 
Later this week, I'll call TDW to confirm what the rate would be for my $100,000 conversion.

*3 b) "the Gambit"*
- Has anyone performed Norbert's Gambit within their TDW RRSP account?
- Once I buy a TSX Interlisted stock on WebBroker, what kind of notification do I need to give the TD rep. in order to "journal" the stock over, so that I can sell it on the NYSE?
- After TD "journals the stock", can I sell the stock on the NYSE using WebBroker application? or
- Do I have to let the TD Rep. perform the sell for me on the NYSE, and incur the higher $39 broker assisted trade?

I'm leaning toward "the Gambit" because I believe the cost of the Buy/Sell ($9.99 x 2) of the interlisted stock (plus any bid-ask spread differences)
will be cheaper than the best currency conversion (ie. $300) TDW can give me.


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## patmanz

avrex said:


> - Once I buy a TSX Interlisted stock on WebBroker, what kind of notification do I need to give the TD rep. in order to "journal" the stock over, so that I can sell it on the NYSE?
> - After TD "journals the stock", can I sell the stock on the NYSE using WebBroker application? or
> - Do I have to let the TD Rep. perform the sell for me on the NYSE, and incur the higher $39 broker assisted trade?
> 
> I'm leaning toward "the Gambit" because I believe the cost of the Buy/Sell ($9.99 x 2) of the interlisted stock (plus any bid-ask spread differences)
> will be cheaper than the best currency conversion (ie. $300) TDW can give me.


You only need to call then and ask to journalize and sell the stock on the USD account. You will be charged the standard price, not the 39$ assisted trade price.

Your best approach is to call them and inform then of what you want to do, while you are still on the phone, buy on the CDN side and immediately ask them to sell on the USD side.


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## humble_pie

at present, gambit strategies are still exotic enough that most online brokerages have limited experience with them. They have not yet developed any protocols to govern gambits.

in time, though, perhaps they will. Currency FX fees are still a wide-open profitable frontier for online brokers. Fees are relatively high & most clients pay these without question, or they fail to understand at what point in a currency exchange transaction an FX fee gets applied. Gambitting is still rare. However, it's difficult to imagine that online brokers will permit this to happen on a very broad scale, as it would mean forfeiting the FX fees they have long been accustomed to charge.

with respect to commissions charged for phone orders to sell a gambitted stock that has just been purchased in the opposite currency, i believe that representatives are free to offer whichever commission they believe is appropriate. Each representative has the right & the responsibility to decide. In some cases the web commish would be offered; in some cases the higher phone order commish. Presumably the more valued clients would be favoured. In all cases, it would be a good idea to confirm live with a representative what is going to happen before launching the initial buy side of a gambit.

tdw clients gambitting to gain US dollars in rrsp should remember that they must use the USD proceeds from the sell side that very same day to buy td US money market fund - or another US security - in order to avoid the rrsp FX fees that will otherwise be imposed overnight.


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## avrex

Pat & Humble. Thank you both for your insight into this topic.
Much appreciated.


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## avrex

Thanks to both 'Pat' and 'humble' for your insights above.
Much appreciated.

I went ahead and performed "the gambit" with about $20,000 in my TDW RRSP.

Here's a log of what occurred:
- I waited until a quieter time of the day. After 1:00 pm.
- I selected a stock that has a high daily volume on both the TSX and NYSE, thereby ensuring low bid-ask spreads and similar prices on both exchanges. I chose Suncor.
- I purchased SU-T 600 shares @ $34.93 Cdn (1:10 pm)
- I called TD. In the queue, on hold. Got disconnected. Called again. On hold. Finally got through. damn, it's 1:30 already.
- I asked the TD Rep., to 'journal' my shares so that I could sell it on the NYSE. She said that I could perform the sell immediately. There was no need to journal.
- I sold SU-N 600 shares @ $34.33 US (1:36 pm)
- The word "gambit" was never mentioned, but the TD Rep., Susan, knew exactly what I was doing.
- After the trade was completed, the TD Rep. left a note in my file that, "upon settlement, the US$ will be placed in my TD-US-Money Market fund with the rates washed". This ensures that I get close to the spot-rate.
- There are two 'luck' portions to "the Gambit". In the time you wait, 1) the stock price will move and 2) the currency price will move. I got lucky in 1) the fact that Suncor had moved up in price a bit and 2) the Cdn dollar rose just a bit prior to my sell.

- What if I had saved time and simply performed the currency exchange with TDW (and not performed the gambit).
I received a quote from the TDW webpage (at 1:10 pm) for a hypothetical $20,000 exchange. Exchange Rate: $1.00 USD = $1.0341 CDN 
I compared this to the 'real' mid-market rates (at 1:10 pm)
http://www.xe.com/ucc/convert.cgi?Amount=1&From=CAD&To=USD&image.x=51&image.y=4&image=Submit 
1 USD = 1.01874 CAD 
At the 1:10 pm time slice, TD charges a 1.51% premium.
And again, from TD webpage (at 1:36 pm)
$1.00 USD = $1.0341 CDN 
and compared this to the 'real' mid-market rates (at 1:36 pm)
1 USD = 1.01899 CAD 
At this time slice, TD charges a 1.48% premium.
Averaging these two rough calculations shows that TD charges about a 1.50 % vigorish.

At the end of the day, it looks like my gambit took my $20,958 Cdn and placed $20,598 US (or approx $20,989 Cdn) in my US Money Market account.
Almost perfectly at par. (I gained $31 from the 'luck' part of this transaction. I payed $19.98 = 2 x 9.99 in commission fees)

If I had just performed the currency conversion at TDW I would have been charged about $300 for the service.

*Gambit Learnings for TDW RRSPs:*
*- No 'journaling' wait time needed.* 
I could have saved some time. After purchasing SU-T, the TDW rep said that I could immediately sell SU-N, even though it doesn't appear in my TDW account yet. (I'm still a little fuzzy on the term 'journalling'. Perhaps this term is used for non-registered accounts where there is an actual US$ account.) 
Please remember that one call to TDW is still required after the US sell to ensure that they properly record a "wash of the rates" and place the settlement in your TD-US-Money Market fund.

*- Money saved.* 
Even though there are currency price movements and bid-ask price movements based on time, performing "the gambit" within the RRSP will always save you money vs the TD currency exchange rate (which is roughly 1.5%). I saved $300 on a $20,000 exchange.


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## patmanz

big thanks you avrex for taking the time posting about your experience doing gambit with TD.

I am planning a rather large gambit next week (first time with TD). Can you summarize me what you told to the rep to perform the actual gambit ?

Also wondering why you didnt perform the buy while on the phone ?


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## avrex

Hi patmanz,
*1. Performing the Buy and Sell while talking to the TD Rep. * 
Yes, I should have called TDW at the beginning to perform the buy. The reason that I didn't was that my frugal nature was worried that I would be charged $39 for broker assisted transaction.
But, you were correct. As long as I'm the one pushing the 'Buy' 'Sell' buttons, my charge is only $9.99.

*2. What did I ask the TD Rep to do?*
a) I asked her to confirm that my buy SU-T order was filled. She confirmed.
b) I then told her that I wanted to sell my SU-T shares (that I had just purchased) on the NYSE. _The reason that I was worried about this step is because the SU-T didn't appear in my account holdings. If I had performed a Sell on the NYSE without owning SU, then this would be considered a short-sell, which is a no-no in RRSPs._
The TD Rep confirmed that I did own the shares and instructed me to continue with my sell.
c) I sold SU-N on the NYSE. I asked her to confirm that my SU-N order was filled. She confirmed it.
d) I then told the TD rep. that I wanted to settle the trade in US dollars. I wanted her to "wash the rates" i.e. I wanted to make sure that there was no currency conversion. She said that she had placed a note in my file that upon settlement of this transaction, "the rates will be washed and the proceeds would be deposited in my TD-US-Money Market fund". 
I'll check on Monday to confirm that the proceeds were indeed placed in that $US fund.

I don't have a non-registered account with TDW. Just a TDW RRSP. 
If you have a non-registered account, I'm not sure if the 'journalling' rules are any different. I suspect it is the same procedure as with the RRSP.

At some point next week, I plan on a 'bigger' gambit  with my wife's RRSP.


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## humble_pie

avrex that was a 10. Oh well done !!

@tdw. Boom coming over. Next week. Look out below.


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## patmanz

avrex said:


> c) I sold SU-N on the NYSE. I asked her to confirm that my SU-N order was filled. She confirmed it.


Wondering how to manually sell on the NYSE ^? Are you the one who actually sold or the phone rep did it ?


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## fatcat

> in time, though, perhaps they will. Currency FX fees are still a wide-open profitable frontier for online brokers.


 based on avrex's description i am guessing that it won't ever be too much of a big issue for these guys ... most people don't want to go through the hassle and i think prefer the certainty and simplicity of the direct currency exchange


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## avrex

patmanz said:


> Wondering how to manually sell on the NYSE ^? Are you the one who actually sold or the phone rep did it ?


Hi patmanz, I did the online sell order myself (while I was talking to the TD Rep on the phone). I used the TDWebBroker application and simply selected 'Sell' SU and for the 'Market' field selected 'US'. Online commision was $9.99 US. Easy


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## Four Pillars

Great description.

I thought the risk of the stock moving made this gambit quite risky. But now I realize that if you save $300 on a $20k transaction - the stock would have to go down 1.5% in order to wipe out that $300.

I realize you had some luck, so maybe the saving wasn't quite $300 - even so, it seems safe enough.


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## pecmajor

Once the funds are in the tdwh US dollar money market fund can you buy US stocks and pay for them with US dollars from the US money market fund?


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## humble_pie

hi pec - yes you can buy any US security at any time & pay out of td US money market. The reason td MMF is used is that there's no minimum hold period.

of course if you knew exactly which US instrument you were ultimately going to buy on the day you got your US dollars in rrsp, ie completed the gambit, you'd go straight to the ultimate target. Storing US gambit dollars in tdw US money market is for people who haven't decided yet what to buy in USD. It's a way of avoiding tdw's FX fee which would otherwise change any loose USD in rrsp back into CAD overnight.


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## larry81

anyone have the extension of any competent td rep ? i was told i needed to wait 3 days for the trade to settle and i dont feel arguing...


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## pablito

I'm going through a similar exercise as avrex and as part of my step 3, I called TDW to inquire about the journaling process and was told that it would take 24 hours to complete. 

From the feedback here, it sounds as though the best thing to do is to call the agent and be sure that they can carry out the journaling right then, and while they're on the line proceed to buy, ask them to journal and then sell. Has anyone done this? I can't help but think the agent might frown on keeping them tied up in this way.


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## humble_pie

avrex's gambit was in an rrsp. To the best of my knowledge tdw representatives are still very cordial about assisting with rrsp gambit trades. I believe it is possible to carry out both sides online in an rrsp - the buy and the sell - but i'd still want access to a representative to confirm the sell side if the website blocked the sell order at the last minute.

only a week ago i posted here that the brokers, if they sensed that too many clients were attempting to bypass their FX fees in non-registered accounts, might possibly move to stop this traffic.

if the 2 messages here today reporting failed gambits were about non-registered accounts, they might be just a coincidence.

or they might be the first faint signs that the big green is deciding that it is not going to lie down like a lamb and let the gambitters race through the FX portals without paying them a single penny ...


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## pablito

Hmm... in my case, I don't think I specified that the journaling would be within an RRSP (which it would). I'll have to ask again.


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## humble_pie

pablito were you really doing both sides within an rrsp ?

it should have worked & is definitely worth a retry. Perhaps try to avoid the same rep because that business about 24 hours sounds a bit strange.

hmmmn ... i can't speak for the tdw mainframe system (most of the reps can't either, at least not exactly) but my guess is that an rrsp is configured differently and may not require "journalling" between the 2 currencies. Perhaps you could try next time without using the word journal (listen to hear what the rep says, how the rep calls the operation.)

btw which stock had you chosen to use for this exercise.

wishing you good luck next time ...


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## larry81

I just had a lengthy conversation with TDWH trying to perform the gambit... they wont do it.

I received the following explanations:

1. you will have forex fee (first lady)
2. you need to wait three day to settle (first lady)
3. we cant technically do it (floor manager)
4. we cant do it because we are in business to make profit (floor manager)

Anyone have the extension to reach a semi-competent rep ? I spoke to a floor manager and argued a bit but realized this was going nowhere

this is a non-registered account


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## Lephturn

Well the next question is - is there a Canadian broker out there that will do this without hassles in registered accounts? Questrade? QTrade?

I guess Interactive Brokers are probably the way to go for non-registered.


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## larry81

Lephturn said:


> Well the next question is - is there a Canadian broker out there that will do this without hassles in registered accounts? Questrade? QTrade?
> 
> I guess Interactive Brokers are probably the way to go for non-registered.


The IB platform is too well done,i simply cant resist the temptation to do active trading with IB


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## humble_pie

from the beginning i've posted extensively about the gambit (it was a year or more before CC noticed me, but then he took up the strategy bigtime). I would say that these not-so-subtle discussions with tdw floor managers are driving the nails into the tdw gambit coffin.

upthread i recently posted a prediction that this might happen.

there are still several ways to gambit. Any experienced pairs trader can figure out these strategies.

1) one can gambit, for example, between 2 different brokerage houses. Pair traders usually have at least one backup account.

online brokerages leasing the ADP mainframe system as opposed to the ISM system can - and often do - configure a website that is more amenable to gambitting, ie both sides can be accomplished online, no need to phone a representative. I've previously posted about this on this forum, even down to naming the brokerages.

2) one can also do half-gambits. That is, choose a security that one already holds long, where the tax consequences of selling are suitable & appropriate, and then simply go sell it, or whatever quantity of it that one needs, in the opposite currency. One can replace the original holding or not, at one's leisure.

3) and one can also do option gambits in cross markets. I do these all the time.

4) finally, one can get into forex trading or become an IB client. IB has superb forex rates for retail investors.

sorry, guys, but you've kinda messed up a good thing at tdw.


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## larry81

humble_pie said:


> from the beginning i've posted extensively about the gambit (it was a year or more before CC noticed me, but then he took up the strategy bigtime). I would say that these not-so-subtle discussions with tdw floor managers are driving the nails into the tdw gambit coffin.
> 
> sorry, guys, but you've kinda messed up a good thing at tdw.


There similar comments dating back from 2005-2006 on another well know Canadian finance forum.

They wont hold any emergency meeting over this dont worry...


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## NorthernRaven

I'm a little confused. Avrex's rep indicated that the journalling wasn't required and the shares could be sold:


avrex said:


> - I asked the TD Rep., to 'journal' my shares so that I could sell it on the NYSE. She said that I could perform the sell immediately. There was no need to journal.
> *Gambit Learnings for TDW RRSPs:*
> *- No 'journaling' wait time needed.*
> I could have saved some time. After purchasing SU-T, the TDW rep said that I could immediately sell SU-N, even though it doesn't appear in my TDW account yet. (I'm still a little fuzzy on the term 'journalling'. Perhaps this term is used for non-registered accounts where there is an actual US$ account.)
> Please remember that one call to TDW is still required after the US sell to ensure that they properly record a "wash of the rates" and place the settlement in your TD-US-Money Market fund.


Either Avrex was misinformed and the rep actually did something in the background, or the system would have allowed Avrex to sell the TSX-purchased stock onto the NYSE without calling (whether it would have eventually caused a problem later or not). All the past TDW RRSP gambit reports I've come across have indicated a need for journalling to enable the system to sell the new purchase onto the NYSE. As I think humble_pie has pointed out elsewhere, the issue seems to be getting the broker to journal before the trade has cleared? Presumably once it has cleared they would have no reason to refuse to journal something, if the system can't sell to NYSE without it (but of course you'd then be taking on 3 days of market risk). It would be interesting to know for sure, for TDW RRSP accounts:

if you buy, say, RY on the TSX, does the system let you sell it again on the TSX before the purchase settles.

if you buy RY on the TSX, once the trade is cleared and settled, will the system sell it on the NYSE without having to call and get TDW to do something like journalling manually.

if you buy RY on the TSX, will the system let you sell it immediately on the NYSE (the Avrex case) or does it need to be journaled.

I don't have any inter-listed equities in my TDW RRSP account, so I can't even check #2, but I'd guess there are folks here who know the first couple from experience?


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## humble_pie

frankly there were messages all over the internet long before the previous decade. Hundreds of thousands of people independently figured out this strategy and all its variations.

bank treasury departments practiced it on a large scale since the beginning of the previous century. In europe, since the late middle ages. I'm not sure about marco polo, though.

a decade ago team managers at tdw were discussing gambit strategies with me. They knew them all.

but it's only very recently, as increasing numbers of clients began to pressure tdw, that the big green has begun to dig in its heels and say enuf is enuf.

btw a little birdie tells me that not all tdw ports are blocked. They might be doing it on a client-by-client basis. Worth trying for anyone who is a good client.

moral of this story: do. not. argue.
also: do. not. call. them. incompetent.


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## pablito

humble_pie said:


> pablito were you really doing both sides within an rrsp ?
> 
> it should have worked & is definitely worth a retry. Perhaps try to avoid the same rep because that business about 24 hours sounds a bit strange.
> 
> hmmmn ... i can't speak for the tdw mainframe system (most of the reps can't either, at least not exactly) but my guess is that an rrsp is configured differently and may not require "journalling" between the 2 currencies. Perhaps you could try next time without using the word journal (listen to hear what the rep says, how the rep calls the operation.)
> 
> btw which stock had you chosen to use for this exercise.
> 
> wishing you good luck next time ...


HP: I hadn't actually purchased anything when I called. I was simply inquiring about how to journal... prep work if you will to get comfortable with the process. I hadn't even identified a stock to use, but yes it would have all been within an RRSP.

I'm new to the discount brokerage game having recently decided to consolidate our various accounts to TDW and use a passive index ETF approach. I am still doing readings on the hedged vs non-hedged debate, but am leaning towards non-hedged hence the interest in the gambit (to purchase Vanguard ETFs for US and International). I'll likely be posting a request for comments/suggestions on my asset allocation and general plan in the next little while.

Pab


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## avrex

I just completed my second successful "gambit" (also known as Norbert's gambit) in my TDW (Toronto Dominion Waterhouse) RRSP. 
Note: This should also work in a registered TFSA account.

I wanted to post this update, because some of you had mentioned issues with performing the "gambit" with TDW.



humble_pie said:


> hmmmn ... i can't speak for the tdw mainframe system (most of the reps can't either, at least not exactly) but my guess is that an rrsp is configured differently and may not require "journalling" between the 2 currencies.


I suspect that humble's hypothesis is correct. There must be some difference in the account and/or mainframe system of the TDW RRSP vs the TDW non-registered accounts. I was able to perform the norbert "gambit" immediately, whereas others (presumably with non-registered accounts) had to wait 24 hours or more for their shares to be "journalled over".

In fact, for today's gambit, I didn't even bother to call TDW to perform the buy and sell.

Coincidentally, with the dollar almost at par today (i.e. 0.9994), the transaction reads very transparent. Here's a log of what occurred today.

- Logged on to TD WebBroker this afternoon.
- Buy 700 shares CM-T (CIBC) @ 78.35 Cdn on the TSX. $54,845 Cdn.
- I got interrupted at work . But luckily, the stock hadn't moved much in price.
- Sell 700 shares CM-N (CIBC) @ 78.30 US on the NYSE. $54,810 US.

- Wash the rates. 
[*Update 2011-May-08*: Toronto Dominion Waterhouse (TDW) will now automatically wash the rates using the TD US-Money Market fund. This 'wash the rates' step can now be skipped, as long as you have registered for the "automatic wash" feature.]
I called TDW after the markets closed, around the dinner hour.
I requested that "upon settlement of the transaction, I wanted the proceeds of the sell to be placed in the TD US$-Money Market fund with the rates washed." The TD Rep confirmed that $54,810 - 9.99 US commission would be placed in my TD US-Money Market fund.

*Conclusion - Money saved* 
I've successfully completed "the gambit" and have accomplished my goal of obtaining US$ at close to the 'spot rate' with just the cost of two 9.99 commissions. That is much better than the approx. 1.50 % vigorish that would be charged with the standard bank currency conversion rate. 

Approx savings in this example, $800.


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## CanadianCapitalist

Recently, Horizons BetaPro introduced US Dollar ETFs that trade on the TSX (DLR and DLR.U). The combination provides a risk-free way to implement a Norbert Gambit.

I recently tried exchanging currency with this method at TD Waterhouse. Saved about $45 on $5,000 exchange. DLR.U trades at $10, so the only cost would be 2 trading commissions plus 2 cents spread per share. So, if you are exchanging say $20,000, your cost would be $60 with the gambit compared to $300 at the typical broker rate.

http://www.canadiancapitalist.com/a-foolproof-method-to-convert-canadian-dollars-into-us-dollars/


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## andrewf

It would be nice if there were an equivalent fund for CAD. FXC is a CAD ETF priced in USD, but it's not interlisted. It would be nice to be able to hedge USD cash in CAD either until it's needed or to journal it over and sell it for CAD.

What brokerages should really do is lower their FX fees.


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## humble_pie

_" What brokerages should really do is lower their FX fees."_

this is true. Surely over time brokerages & their parent banks will come to understand that the trickle of currency gambit orders is truly turning into a river & will turn into a floodtide that cannot be stopped.

FX fees have been so lucrative for banks for so long that i expect it will take many years to convince them that people will not pay those exorbitant 2-3% fees, but will instead vote with their feet. OK with their keyboard fingers. Increasing numbers of online clients will dodge FX fees entirely, largely by sharing strategies such as the ones described here in cmf forum. Hopefully, in time the banks will get the message.

what i understand by CC's discovery in dlr + dlr.u is that a risk-free factor can be nailed down by paying a nominal rate of 2 per mil in addition to the regular commish for 2 trades.

one can still gambit with stock for no more than the 2 commish, but there is a risk that in the seconds between the 2 trades the stock being utilized will move against the trader. The elimination of this risk with only a very modest increase in cost is a definite advantage imho.

a bit of a summary seems in order. This is an RRSP thread. True stock trading gambits in tdw rrsps can still be executed 100% online. Both the buy & the sell sides can be accomplished with a pair of rapid online orders. 

non-registered accounts at tdw are different in that the sell side of the gambit pair cannot be carried out online. Client must ask a licensed representative to carry out the sell, and in turn the rep has to enter a non-standard journal instruction that is more complicated & costly for the broker. 

word is that the big green is recently refusing to carry out all gambit sell orders in non-registered accounts. Refusals are not haphazard as before, but rather are coming down from management.

parties with regular or intermittent US income - or conversely, parties with regular outbound payments in USD that have to be obtained from CAD - would probably be best served by establishing accounts with brokers whose mainframe systems permit easy, 100% online gambitting. Among these brokers are rbc & bmo.

brokers to avoid if client wishes to gambit extensively in non-registered accounts would be tdw & scotia itrade.

another way to go is interactive brokers w forex trading.


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## andrewf

Can anyone explain to me why you'd bother will all this calling and journaling nonsense when IB is cheaper and easier? They have minimum commissions/month, true. I've also heard a few horror stories about service, but I wonder if it is just people who don't know what they are doing getting burned by the margin rules (playing too close to the edge).

IB sounds like a really solid brokerage. I don't have need for a non-registered account at the moment, so I haven't opened an account with them. They seem like the only reasonable place to have a margin account in Canada.


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## humble_pie

there's nothing nonsensical about saving hundreds $$$ in FX fees.

there are plenty brokers w platforms that can gambit currencies online, fast, efficiently & near-free. Roybank & bmo are 2. Tdw & scotia itrade work this in rrsp.

this is not a thread about interactive brokers. There are other threads comparing discount brokers. There are many reasons why ib is not necessarily a good choice.

andrew perhaps you should work a margin account or 2 before you rule on which is the best ...


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## andrewf

They are in a league of their own wrt to fees. 


Even if some of the other brokerages make journaling easy, it begs the question why they don't just offer reasonable FX rates. Make the unsophisticated pay full freight?

As far as my assessment of Canadian margin accounts, I was totally transparent in saying I have no direct experience with which to judge. I couched it as an opinion based on what I've heard and read. In other words, no need to jump on me for it.


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## Four Pillars

@Humble - I share your desire for lower FX fees, but I have my doubts that most investors are even aware of them, much less actively avoiding them (like we are). I don't see them being lowered anytime soon - but hopefully I'm wrong.

@AndrewF - I agree that IB is the best for non-registered accounts, but most people (like myself) want to have all our accounts in one place. Plus a lot of people (like myself) don't have non-registered accounts.

For RRSP accounts, Questrade is the best deal for FX fees by far. They charge 0.5% which is less than a half of what most brokerages charge. They are known mostly for their cheap trading commissions and poor customer service, but I'll bet that most of their clients who are diversified outside of Canada (like myself) probably save far more money on FX fees than they do on trading commissions.


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## humble_pie

4 pillars i'm sure you're right, FX fees won't be lowered any time soon. While i do believe that brokerages & banks try to respond eventually to what the clients want, i also believe that the FX issue is so ancient, so profitable for them, and still so little understood, as you say, that it is probably one of the very last issues they will ever bend on.

still, somebody has to do something otherwise the world will never change at all. I for one am content to support gambit knowledge here in this forum and to observe growing numbers of posters chiming in here with reports about how successfully they carried out the exercise & how much it saved them in FX fees.

btw fp here's 2 things ib & questrade have in common:

1) they both have commissions based on charge-per-share for larger amounts of stock, so 5000 or 10000 shares of cheap stock at those 2 brokers can reach punitive commish levels, whereas bank brokerages will execute orders for unlimited quantities of stock at fixed price of 9.99 or less.

and 2) both ib & quest support elitetraders.com, an important US website for serious option & futures traders that was originally begun (i believe) by mostly ib clients.


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## CanadianCapitalist

I agree with hum and 4P on fx fees. Most investors are not even aware of them and will not seek ways to avoid it. One recent commenter on my blog found out how his entire profits on a US dollar stock were wiped out by a foreign exchange conversion on the buy and 2 foreign exchange conversion on the sell in a iTrade TFSA account.

Many clients are reporting that TDW now refuses to buy, journal and sell right away when gambitting in taxable accounts. This is not ideal because investors have to hold the stock for a week or so. DLR/DLR.U is excellent for gambitting because Horizons BetaPro is willing to work with market makers to keep bid-ask spreads tight even though the volume is quite low.


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## humble_pie

re the td, i'm not surprised that senior management made the decision to just say no to instant gambits. The journal was not a standard journal, it had to be done by hand, it involved the compliance department, once too many people commenced asking for this manual service they really did have to refuse.

it's worth mentioning again that tdw rrsps do permit online gambitting, ie the platform can support online buy orders immediately followed by online sell orders in the opposite currency. Bing bang.

and it's worth mentioning again that, as several posters in this forum have discovered, gambitting works perfectly, 100% online, at bmo & roybank. Just remember to do the buy order first, followed by the sell order. No need to speak to anybody. The system will seamlessly collect & deliver shares & cash from & into the correct account, in the correct currency.


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## gibor365

From my personal experience TDW's FX fees much higher than CIBC Investor Edge.


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## humble_pie

gibor this is a thread about how to avoid FX fees altogether by arbitraging an interlisted stock between canadian & US accounts. These days the strategy is commonly known as a gambit.

thread has nothing to do with FX fees charged by any institution. Arbing/gambitting will always be the closest to free exchange that anybody could ever get. Might you perhaps like to study how to do it.


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## gibor365

humble_pie said:


> gibor this is a thread about how to avoid FX fees altogether by arbitraging an interlisted stock between canadian & US accounts. These days the strategy is commonly known as a gambit.


I read this thread and I'n kinda confused ...
I have RRSP in TDW. I want to buy US stocks , for example KO for amount of $5000.
What should I do to avoid FX fees?
1. Without calling TDW reps, Can I buy RY-T and sell it immediately on NYSE as RY-N and wash trade to TD US Money market? Or I have to wait until it's settled? (T+3)

2. Anyone tried to do similar thing with CIBC Investor Edge? They charge less FX , but don't allowed to "wash" trade...I called them and asked if I sell US stock, can be money parked in US Money market fund.... and they told me that "it's impossible"


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## andrewf

The suggestion is also to use DLR (in CAD) and DLR.U (in USD) which are equivalent. This is an ETF invested in USD cash and cash equivalents, and thus essentially riskless when compared to something like RY, which might move over the time you are executing the trade.


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## Jungle

andrewf said:


> The suggestion is also to use DLR (in CAD) and DLR.U (in USD) which are equivalent. This is an ETF invested in USD cash and cash equivalents, and thus essentially riskless when compared to something like RY, which might move over the time you are executing the trade.


I'm surprised nobody has been talking about this on the forum yet... CC had a couple of posts on his blog regarding it too. If I understand correctly, these two etf's will now allow Canadain investors to exchange CAD/USD at spot rate with only the cost of broker's commissions ? So with Questrade, this could cost you about $10 to change money. 

I think this is amazing.


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## andrewf

For small amounts. DLR trades around $10, and questrade is a penny a share, min 4.95 and max 9.95. So, ~$10 for about $5,000 exchanged, up to about $20 for $10,000 and up. Being able to exchange a million bucks for $20 is pretty compelling though. 

Anyone tried this journaling technique with Questrade? Their RRSP FX rates are already pretty good at 0.5% so I haven't investigated doing this. My parents have largish margin accounts with Questrade and being able to save a bit on FX would be nice for them.


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## Four Pillars

Jungle said:


> I'm surprised nobody has been talking about this on the forum yet... CC had a couple of posts on his blog regarding it too. If I understand correctly, these two etf's will now allow Canadain investors to exchange CAD/USD at spot rate with only the cost of broker's commissions ? So with Questrade, this could cost you about $10 to change money.
> 
> I think this is amazing.


I would assume that converting at the "spot rate" still implies some cost? So it still costs more than $10.

Regardless, it is still quite amazing.


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## Four Pillars

andrewf said:


> For small amounts. DLR trades around $10, and questrade is a penny a share, min 4.95 and max 9.95. So, ~$10 for about $5,000 exchanged, up to about $20 for $10,000 and up. Being able to exchange a million bucks for $20 is pretty compelling though.


You'd get nailed with ECN fees - they are quite small per share, but there is no upper limit. Even still, the conversion cost would probably be quite reasonable (but a lot more than $20).



andrewf said:


> Anyone tried this journaling technique with Questrade? Their RRSP FX rates are already pretty good at 0.5% so I haven't investigated doing this. My parents have largish margin accounts with Questrade and being able to save a bit on FX would be nice for them.


I haven't tried this technique yet with Questrade, but I plan to quite soon.


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## gibor365

What is ECN fees? and why I should pay it when buying/selling ETF?

About DLR and DLR.U ... I'm not clear as both of them trading on TSX, and it's different from , for example , RY-T and RY-N.

I read CC post and didn't get exactly about journaling that takes 2 days and he called rep to do it... 
I'd prefer to do everything online


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## Jungle

andrewf said:


> Anyone tried this journaling technique with Questrade? Their RRSP FX rates are already pretty good at 0.5% so I haven't investigated doing this. My parents have largish margin accounts with Questrade and being able to save a bit on FX would be nice for them.


This guy wrote an amazing post on the gambit @ TDWH, RBCDI and Questrade. He claims with Questrade, you can not gambit in a registered account, because it goes short. 

http://forums.redflagdeals.com/norb...ct-investing-td-waterhouse-questrade-1015297/


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## Jungle

Four Pillars said:


> I would assume that converting at the "spot rate" still implies some cost? So it still costs more than $10.
> 
> Regardless, it is still quite amazing.


They are taking $0.02 for every 1000 units off the spot rate, then they take the yearly mer cost of 0.45%. So this is a really low cost. 

"The Horizons U.S. Dollar Currency ETF ("DLR") seeks to reflect the price in Canadian dollars of the U.S. dollar, *net of expenses *by investing primarily in cash and cash equivalents that are denominated in the U.S. dollar"

http://www.horizonsetfs.com/pub/en/etfs/?etf=DLR&r=o


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## avrex

humble_pie said:


> the difficulty is that many of these USD transactions will be reported in CAD & the system will be using the broker's FX rate of the day, complete with those steep broker's FX fees, to calculate those CAD amounts.
> 
> this is why it's important, when gambitting in tdw rrsp, to note down every single USD figure that shows up in the sequence of transactions, including actual USD proceeds, USD commish, USD net proceeds, etc.
> 
> how the system then mumbles these figures to itself over the next couple of days does not really matter. In the end you should wind up with the exact USD amount you have set forth above, namely, 10,704, which may in turn be subject to a commission.


As humble_pie explained to a new member, in the above Forced currency conversion thread, you should try to ignore TDWs internal CAD to USD bookkeeping activities. 

The purpose of my post today, is to reiterate what humble_pie has stated. a) Keep track of your transaction b) Ignore the TDW activity screen, as it does it's internal CAD/USD balancing. 

As an example, here is the recent activity screen of the gambit that I did in my new TFSA account, to illustrate some of the confusion that this may cause.









Ignore TDW's FX rate of the day, shown as "CAD @1.95 % US DIS". 
(The 'true' FX rate, at the time of the trade, was approx @1.0035.)
Ignore the entire 'Net Amt' column, as it is calculated based on TDW's FX rate. 
In fact, ignore the calculations in the entire Activity screen above. 

The important thing is to check your account balances, 3 business days later, after things get settled.

In my example, 
1. On Feb 17th, I purchased 1100 shares of RIM on the TSX (CAD $16,576.10 minus commission)
2. A minute later, I sold 1100 shares of RIMM on the NASDAQ (USD $16,633.10 minus commission). (i.e. Exchange rate 16633/16576 = 1.0034)
Total USD to be received is $16,633 - $33 commission = $16,600 

On Settlement Day, 3 business days later,
3. I received $16,600 US$ in my TD US M/MKT fund. Perfect.

*Conclusion: The gambit will give you close to the spot currency rate.*
Approx savings in this example, $250. (compared to the 1.5% currency conversion fee that can occur without the gambit.)


(Sidenote: Here's another reason to check your transactions. 
This was my first transaction in my TFSA and I was charged a $33 commission each way. Based on my household assets, this should have been $9.99. 
I just called TDW to have this error corrected.)


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## Uranium101

so, TDW TFSA can now hold USD?


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## slacker

I enjoy the ease of gambitting in TDWH RRSP account. Buy/Sell, done in 30 seconds.

Has anyone tried doing the non-DLR gambit method with Questrade RRSP account?


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## avrex

Uranium101 said:


> so, TDW TFSA can now hold USD?


no. 
You hold your US$ in the TD US M/MKT fund (TDB166).


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## mrPPincer

Uranium101 said:


> so, TDW TFSA can now hold USD?


Yes, (TDB166) same as with RSP, but keep in mind that foreign withholding tax is not recoverable in a TFSA.


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## Uranium101

avrex said:


> no.
> You hold your US$ in the TD US M/MKT fund (TDB166).


This is sad, I would recommend you people to try BMO InvestorLine and RBC Direct Investing.


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## mrPPincer

I believe it's set up that way because of the limitations of the web platform that TD uses, but TD allows for autowash in SDRRSP and TFSAs, which means (I think, I have yet to try it) that you can theoretically go from holding canadian stock or mutual funds to holding your US stock or ETF of choice all in just one day. 
Is that possible with BMO and RBC?


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## Uranium101

mrPPincer said:


> I believe it's set up that way because of the limitations of the web platform that TD uses, but TD allows for autowash in SDRRSP and TFSAs, which means (I think, I have yet to try it) that you can theoretically go from holding canadian stock or mutual funds to holding your US stock or ETF of choice all in just one day.
> Is that possible with BMO and RBC?


you believe it. I haven't tried BMO, but I heard it is the same as RBC Direct Investing.

Here is how it works:
You have 10k CAD in your account. ANd you want it to become USD.
You select your account (CAD), and buy from your selected market (TSX).
After it is executed, you sell your stock on your selected exchange (NYSE), and select where should the proceed by deposited (USD).

You are done. You might see a short position at the USD side, but that is just phantom. It will disappear in a few days. But it won't affect anything. YOu can trade freely.

I have known a stupid person who sold his stock on NYSE, but wanted the proceed to be deposited into CAD side.

For each account at RBC DI, you get 2 side accounts. For example, if your account number is 123456, you will have 123456CAD, and 123456USD. it is not exactly as it shown, but that is how it works.


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## humble_pie

td waterhouse registered accounts gambit instantly just like bmo & ry.

the only difference is that with tdw, the client sees the daily conversions for the sale proceeds during the T+3 settlement period displayed in the account.

with bmo, client does not see. The end result is the same. Client winds up with exact number of dollars in the currency of the sale.

it is true that gambits in non-registered accounts at ISM brokers like tdw require a phone call to a licensed representative to carry out an instant gambit sell. The big green charges an agent-handled commission because there is a manual journal operation that their credit department has to carry out.

other ISM brokers, to the best of my knowledge, are unwilling to carry out the sell side of instant gambits.

investors who do not wish to pay an agent commission on the sell side can always take the slower DLR/DLR.U route, with 2 online orders spaced a few days apart, although this does not work particularly well for the DLR.U --> DLR direction, ie moving from USD to CAD opens a risk window.


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## larry81

Anyone know how to enter a gambit in quicken ?


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## CanadianCapitalist

larry81 said:


> Anyone know how to enter a gambit in quicken ?


I don't use Quicken. In Microsoft Money, I can track a gambit with Buy in Canadian Account, Transfer Out to US account and Sell in US account.


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## larry81

Quicken say: "Please choose an account that has the same currency as the security"


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## Rysto

Yeah, tracking the Gambit in Quicken is a huge pain. I think that what I did to track it was (for a CAD -> USD conversion) enter the buy and sell in the Canadian account, and transferred the proceeds from the sell into my US account.


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## fersure

Learned something new about the wash trade process today.

For my first wash trade, I trimmed some VTI and purchased some VWO. I executed the trades within minutes and tried my best to match the value of the trades (ie: sold 35 units VTI and purchased 75 units of VWO). As this was my first wash trade, I did not have TDB166 within my account.

After the trade, I was left with less $US100. I waited for the trade to settle, noting previous comments to ignore the TDW internal accounting. However, I was on the lookout for the remainder of the trade to be deposited into TDB166. ($US Money Market Fund). 

However, once the trade settled, no TDB166 appeared. When I called today to see what was happening I learned that if the net remainder is less than $US100, the balance will be converted to $C and deposited into the Canadian cash balance.

I guess this makes sense, given that you need at least $100 to purchase mutual fund. However, it is yet another disappointment and again highlights the need for TDW to offer a $US RRSP.


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## avrex

fersure said:


> However, once the trade settled, no TDB166 appeared. When I called today to see what was happening I learned that if the net remainder is less than $US100, the balance will be converted to $C and deposited to as Canadian cash.


That is interesting, and makes sense, based on the bank's rules.
Yes, this is another 'gotcha' when it comes to currency conversion costs.
Thanks for sharing.


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## avrex

I've got a little 'tear' in my eye. :tears_of_joy:

This thread was *my very first 'post' *in the Canadian Money Forum back in 2010. 
I'm glad it's still being looked at.


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## fersure

I bookmarked this post in my browser about a year ago, figuring it would be useful one day. It was!


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## My Own Advisor

@avrex, it's a great thread. No tears, smile


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## larry81

I just performed a rather large gambit at TDWH. Just to show you all how the process is really a 'hit or miss', two exchange occured:

First rep:
1. Performing this type of transaction is ILLEGAL !!!
2. We cant do it 
3. let me verify with supervisor, please hold-on... *click* (she hung up on me)

I call back...

Second rep:
1. Ah, you want to perform a gambit, no problem we can do it !
2. yadadadada, ok its done
3. Since you are such a great client TDWH will charge you the Web commish of 9.99$
4. Have a good day !

Total transaction cost in in % (bid/ask spread +commish): 0.11%

i used TD stock instead of the DLR/DLR.U route


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## fersure

... oops.


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## GoldStone

fersure said:


> Thought I'd bring this thread back to life, given TDDI's announcement today.
> Frankly, it's about time!


We discussed this announcement yesterday. There is a reason to be cautious about it. There is a good chance they will screw up the ability to do an instant online gambit.

http://canadianmoneyforum.com/showt...ally-launching-USD-component-for-RSP-and-TFSA


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