# Toronto Dominion Waterhouse (TDW) RRSP - You can now automatically 'wash the rates'.



## avrex (Nov 14, 2010)

Effective around May 03, 2011, TDW has begun to allow the automatic 'wash of rates'. 
I've seen no press release. Just a brief mention of automatic washing in Rob Carrick's article.

This automatic wash applies to one-way or two-way purchases of US Stocks, US Equity Options, US Fixed Income. You will now see the results of the wash in your account on the next day.


Let's review what this means.
As we know, the TD Waterhouse RRSP account only allows you to hold cash in Canadian Dollars (CAD). Any US Dollar (USD) amounts are usually held within the TD US M/MKT U$ Mutual Fund (TDB166).

Example 1. I sell $50,000 VXUS-N. 
In the past, after the trading day, I would need to call TDW and ask that they 'wash the rates' and place the proceeds of the trade in the TD US$ Monkey Market Fund. However, now, there is no need to call in. The proceeds will automatically be placed there.

Example 2. I sell $50,000 VXUS-N and purchase $25,000 VWO-N.
Once again, no need to call in. The automatic wash occurs and the remaining $25,000 goes into the TD US$ Monkey Market Fund.

Example 3. What if I don't have enough USD to buy the US stock that I want. In this case, you will still need to
use "Norbert's gambit" to obtain US$ at the 'spot rate' and avoid the expensive 1.50% currency conversion fees.


*How do I enroll to automatically 'wash the rates'?*
At this time, you cannot set this up online within WebBroker. You will need to contact TD Waterhouse Discount Brokerage (1-800-465-5463) to enroll and have them turn this feature 'on'.

*The Good. * This is a positive step by TDW, to reduce currency conversion costs. In the past, I had to call TDW, after market hours to ensure I didn't lose money on currency conversion fees. This new automatic method saves me time.
*The Bad.* Unfortunately, the dividends from US Equities and US Interest will still be converted to CAD, using the bank's expensive currency conversion fee. Not a great amount of cash will be lost here, but it is worth noting.


----------



## humble_pie (Jun 7, 2009)

good news & great explanation, thank you avrex.

just a tiny comment re US dividends, which you note as still "bad" news.

a tdw client can DRIP his US dividends in rrsp.
these divs will arrive as extra shares in USD & be added to his original holding in USD ... no FX fee whatsoever.
a partial share amount might get paid as CAD cash but we are only talking about a few pennies in FX fees here.

as with canadian shares, not all US dividend payors have DRIP plans.


----------



## I'm Howard (Oct 13, 2010)

Dividends witheld in the U.S means they are not taxed in Canada, I fail to understand the concerns about this witholding tax because in all probability it is likely less than you would have to pay here.


----------



## humble_pie (Jun 7, 2009)

howard 

??

this thread is about US holdings in tdw rrsps.

there is no withholding tax on US dividends paid into any rrsp at any broker in canada.

avrex has just uncovered that tdw has made one more step towards an all-US rrsp. In practical working terms this is about 99% complete.

tdw's mainframe system leased from IBM - the ISM system - has made it difficult all these years for the big green to configure an all-US rrsp platform. Little by little they have accomplished this, or close to it.

it's been easier for royal because their mainframe (ADP) is more amenable to some USD configurations. However i've traded extensively on both systems & i would like to say that the ISM system is a fabulous workhorse, virtually glitch-proof. In contrast i've seen some account holdings vanish entirely from rival ADP systems.


----------



## Jungle (Feb 17, 2010)

Too bad they couldn't "wash" the us dividends into that money market fund. 

When will TD get with the program and allow USD to be held in RRSP? Everyone else is doing it now. Time to update their interface.. washing is so mickey mouse.


----------



## humble_pie (Jun 7, 2009)

no, everyone else is not doing it now.

brokers using ISM, which is a far more reliable system, cannot readily configure rrsp in USD.

only 3 brokers have true USD rrsps, but the rest of their services, or lacks in their services, make at least 2 of these brokers mickey mouse indeed.


----------



## CanadianCapitalist (Mar 31, 2009)

humble_pie said:


> good news & great explanation, thank you avrex.


+1. I called yesterday after reading Rob's column and set our accounts to automatically wash trade. There is no downside to this, so don't forget to set up automatic wash trading for your TFSA accounts as well.


----------



## gibor365 (Apr 1, 2011)

Exchange rate is very bad in TDW, much worse than for example in Investor Edge CIBC, but on other hand you cannot "wash" trades there


----------



## m3s (Apr 3, 2010)

If RBC lets people hold USD then why can't TD? Sounds like this is just to get all the people "in-the-know" to stop calling in tying up the lines

If TDW would let you hold USD I would switch but as it stands Questrade works better for me.


----------



## Cal (Jun 17, 2009)

As some of you know I had been looking into some of this recently. A very timely post.

In my case, I don't have the funds in USD yet, so I would have to do the gambit first....but then the trading will be much simpler.


----------



## larry81 (Nov 22, 2010)

Another reason to like TDWH !


----------



## alphatrader2000 (Aug 18, 2010)

avrex said:


> Effective around May 03, 2011, TDW has begun to allow the automatic 'wash of rates'.
> I've seen no press release. Just a brief mention of automatic washing in Rob Carrick's article.
> 
> This automatic wash applies to one-way or two-way purchases of US Stocks, US Equity Options, US Fixed Income. You will now see the results of the wash in your account on the next day.
> ...


LOL... It took them what few years to find a solution for this. Wow... my foot... If you are looking for US Registered account and EFFECTIVE US registered accounts, you can use Questrade which started US Registered account, followed by some firms like Virtual Brokers (great for active traders), Qtrade (great for investors)


----------



## humble_pie (Jun 7, 2009)

i sometimes wonder why tdw is the object of so many attacks about its handling of USD in rrsp when only 3 brokers - and 2 are small brokers, with limited services - actually do offer USD rrsps, while all the others do not.

the fact is that this large crowd of non-USD-rrsp brokers do not offer anything as good as the equal-to-USD strategies & compensations which the big green has worked out.

so why it's always the big green that gets attacked is mysterious. Perhaps certain parties just take pleasure in berating a good broker for no reason.

tdw's rrsp platform is not because of any tdw shortcoming or omission. Rather, tdw is restricted as to certain US configurations by the very sturdy & reliable ISM mainframe system which it leases from IBM, as do numerous other brokerage houses. All these other brokerage houses are equally restricted.

among the ISM-based brokers, tdw is now & has always been the leader in creating loops & patches that accommodate USD holdings in rrsp for their clients. 

there is a rival & newer ADP mainframe system that does make certain US configurations easier, including USD in rrsp & including gambit trades.

i myself have traded extensively at brokerage houses using both systems and in my experience ADP is less stable. Even scarier, an ADP system was recently capable of losing a holding of mine completely out of my account. The holding simply vanished overnight, without a trace. If i had not specifically asked to have my missing security returned, who knows whether the system would ever have even corrected itself. Episodes like this never occur at tdw.


----------



## CanadianCapitalist (Mar 31, 2009)

I also think the attacks on TDW are a bit unfair.

TD Waterhouse has offered wash trading for many years when every other broker (including the smaller ones) dinged investors 3 to 4 percent every single time they sold a USD security in their RRSP account and purchased another. I recall moving all my accounts from RBC DI to TDW simply to take advantage of wash trading. I reckon I saved thousands of dollars in replacing direct US stock holdings with ETFs. Also, if you recall TDW was first among the big brokers to reduce commissions if household assets exceeded $100,000.


----------



## Eclectic12 (Oct 20, 2010)

I'm Howard said:


> Dividends witheld in the U.S means they are not taxed in Canada, I fail to understand the concerns about this witholding tax because in all probability it is likely less than you would have to pay here.


Hmmm ... this is odd on two counts.

Number one - this thread is about RRSPs, which are US withholding tax exempt
(i.e. no US tax should be taken).

Number two - this article says


> A Canadian shareholder in the top tax bracket will lose 46% of the dividend to Canadian tax. In the end, only about a third of the original income earned by the U.S. company gets into the pocket of the Canadian shareholder.


So unless you personally are in some sort of special situation - US dividends can be both US withholding and Canada income taxable.

Link to article: 
http://www.collinsbarrow.com/news_showArticle.asp?articleID=66&typeID=25


Or if you prefer, here is a CRA link:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/121/frgn-eng.html


Cheers


----------



## gibor365 (Apr 1, 2011)

CanadianCapitalist said:


> I also think the attacks on TDW are a bit unfair.


I have acounts with both TDW and CIBC Investor Edge...Exchange rate in TDW 3 times or so worse than in CIBC.. I was buying US stocks in both on the same day and TDW gave me something like 0.98 and CIBC 1.01..
So if you buy and hold - CIBC much better (personally I try to buy US stocks only on CIBC), if you trade a lot TDW is better (because of the "wash").

Another example why I don't like TDW, I bought PRF some time ago at market, and TDW gave me price higher than price was for whole date at all... when I called and complained -> they returned me some money as a goodwill  (substructud the highest price of the day from their price ).

TWD interface is horrible (comparing to CIBC), you even cannot search your transactions..
The major advantage of TDW - possibility buy TD e-series funds


----------



## cardhu (May 26, 2009)

avrex said:


> Effective around May 03, 2011, TDW has begun to allow the automatic 'wash of rates'.


Automatic washing of rates isn’t new ... they’ve been doing that for a long time. What does appear to be new is the ability to have TDW automatically enter a buy order or a sell order on your behalf, without consulting you. This is a good thing. I have asked them several times over the years if it would be possible to issue a standing instruction of this sort and was always told “no”. So this is an improvement. A true US$ RRSP, where there is no need to have offsetting transactions, would be better still.


----------



## avrex (Nov 14, 2010)

cardhu said:


> Automatic washing of rates isn’t new ... they’ve been doing that for a long time.


Disagree. 

Prior to May 03 2011, in my TDW RRSP, for each USD stock transaction that I made, I had to phone in at the end of market day and request that they "wash the rates". If I didn't phone in, I would be 'charged' the standard currency conversion rate.

The ability to "wash the rates" in a TDW RRSP, is a new feature, that you can now elect to enrol in.


----------



## humble_pie (Jun 7, 2009)

avrex won't you please be patient w cardhu. He likes to follow long after a good idea has been launched & pretend that he was the one who discovered it years & years ago ...

re USD & the big green rrsp:

- tdw clients might want to remember that many US dividends can be DRIPped in rrsp (usually major div-paying stocks) so clients who elect US drips in rrsp can avoid all currency FX fees;

- brokers leasing ISM system such as tdw & itrade cannot easily configure certain US applications such as USD in rrsp & closing sides of gambits. This is what holds tdw back. If they could they certainly would redesign their USD rrsp platform; i'm 100% sure tdw is fully aware that this is what their clients want. But for the present they & all the other ISM brokers have to use workarounds & patches. The big green is pretty darn good at developing these workarounds imho. Some ISM based brokers have no workarounds at all. It sounds like cibc may be one of these.

- apparently tdw has made a decision not to lease rival system ADP - which i think is a good idea since in my experience ADP systems have some unpleasant glitches - and tdw is instead building its own mainframe. I would imagine that rrsp in USD will be a priority. In time this new system will replace the present ISM, whose principal shortcoming - in tdw's eyes - has always been inability to calculate margins in real time.


----------



## cardhu (May 26, 2009)

My, what a slanderous outburst by our resident baked good. Grow up, pie, and don’t be such a hypocrite. Your constant gratuitous insults & personal attacks add no value to these discussions. 



avrex said:


> Disagree


Nevertheless, the ability to “wash the rates” is not a new feature … TDW was washing rates in RRSP accounts at least a decade ago … it wasn’t done automatically then, but they would do it very willingly & helpfully if you called … for at least the past year, and possibly longer, its been done automatically, in the background, with no need to enroll.

You are confusing the washing of rates, with the placing of offsetting trades … the two are related, of course, because if there were no offsetting trades, there would be no rates to wash, but they are not the same thing … the reason you had to call in prior to last week had nothing to do with washing the rate … the reason you had to call in was to place your offsetting order, and the reason you couldn’t place that order online is because the settlement dates wouldn’t match up if your offsetting trades involve a stock in one direction (3-day settlement), and a mutual fund in the other (1-day settlement). If the settlement periods on your offsetting orders did happen to match up (ie. stock sale offset by stock purchase, or MF redemption offset by MF purchase), you could place all your orders online and not have to call in at all, and the rates would be washed in the background, automatically.

What appears to be new and requires enrolment is the ability to have TDW automatically place those offsetting MF orders on your behalf, to sweep any excess funds on either side of a transaction either into or out of the US$MMF. This is an improvement. A true US$ RRSP, where there is no need to have offsetting transactions, would be better still.


----------

