# Best way to exhange CDN $$$ for US $$$?



## Ihatetaxes (May 5, 2010)

Does anyone have any tips on where to get the best exhange rate for converting large amounts of money to US funds? There are several companies that come up with a Google search but I'm wondering if there is one that is any better than another. I'm sure my bank is not going to give me the best deal and I'm hoping to save a few grand on this transaction.


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## uptoolate (Oct 9, 2011)

If you have a discount brokerage account then the least expensive way is by using Norbert's Gambit. http://www.finiki.org/wiki/Norbert's_Gambit Lots written on it in various forums and publications. 

Another set of links is contained within this discussion on the Financial Webring Forum. http://www.financialwebring.org/for...=114451&p=458494&hilit=tdw+conversion#p458494 

Also, several discussions on this forum in past including: http://canadianmoneyforum.com/showt...ambit-calculations?highlight=norbert's+gambit


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## avrex (Nov 14, 2010)

It sounds like you are looking for a currency exchanger with good rates. I can't bear to go that route, due to the amount of money that would be lost in the transaction (especially if you are talking about large amounts).

Here's what I do.
1. Transfer CDN $ to my non-registered discount broker account.
2. Perform Gambit in non-registered account.
3. Transfer USD $ to my US dollar bank account at TD Bank. Go to bank and withdraw funds.

Result: Save a lot of money.


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## Ihatetaxes (May 5, 2010)

Thanks I will research this method. What is the risk/downside if any?


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## GoldStone (Mar 6, 2011)

Ihatetaxes said:


> What is the risk/downside if any?


http://www.finiki.org/wiki/Norbert's_Gambit#Pitfalls_and_problems


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## humble_pie (Jun 7, 2009)

one of the risks is that parts of that finicki/wiki article are misleading.

- at most brokers gambitter cannot short his way out. Brokers have good reasons for this.

- brokers whose trading platforms do not support instant cross-currency sells can *not* be bullied into granting web commish when they take the sell order by phone. But then, it's fairly obvious who wrote that irritable phrase about broker platforms not being "up to snuff."

- gambitting was no more "developed" by a gentleman named norbert schlenker than did that gentleman fly to the moon. Gambitting is nothing more than plain & simple arbitrage. Buy in one market, sell in another market, gain an advantage. Arbitrage has been around for hundreds of years. Week in, week out, millions of traders arb gazillions of pair trades.

- a decade ago, norbert S. publicized currency arbitrage & it came to be called gambitting. There was a flurry of internet posts, many of which are obsolete today.

- finiki/wiki article includes a link to decade-old gambit discussions on financial web ring. The level of aggression & foolish pigheadedness evidenced by these old messages is far too high. No wonder those posters 10 years ago had so much trouble with their gambits. One poster complained that he fought bitterly for 25 minutes with his licensed representative, who was tasked with the sell side of a gambit. During those 25 minutes, his stock slipped in price ! duh.

- contemporary gambitting is fast, sleek & efficient. Canadian Capitalist revived the art in 2010 with this article. He says he got the idea from a canadian moneyforum member. Apparently CC didn't recognize that the manoeuvre was arbitrage; he called it "a trick."

http://www.canadiancapitalist.com/save-on-canadian-dollar-to-us-dollar-conversions-and-vice-versa/

CC's article unleased a tsunami of gambits across canada. TD waterhouse utilizes a mainframe that makes gambitting difficult on the sell side. Many other brokers including scotia, commerce & hsbc utilize the same mainframe. All these brokers turned out to have difficulties with the sell side of a gambit.

soon, tdw became uncooperative. The same anonymous canadianmoneyforum member negotiated a successful resolution with the big green & wrote a large part of this article on how to arb (gambit) your currencies at td waterhouse.

http://www.canadiancapitalist.com/instant-norbert-gambit-for-all-td-waterhouse-investment-accounts/

notice that at brokers whose platforms, like tdw, are built on ISM (these are the brokers for whom gambit selling in non-registered accounts is difficult), there is no time or room for argument. The gambit client either discusses the proposed trades on the phone with a representative & secures the necessary cooperation first. Or else the client should abort the operation & try again later.

brokers such as bmo & roybank, whose trading platforms are built on ADP, are able to offer seamless instant gambitting - both buyside & sellside - online. It's really amazing to see.

lastly, it should be said that tdw rrsp & tfsa accounts can also gambit currency trades instantly & seamlessly. It's only the non-registered accounts that block the sell side online.


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## Ihatetaxes (May 5, 2010)

Humble, VERY helpful. Thank you.

I do use RBCDI so it should be pretty simple. Looking at a large sum so I should be able to save quite a bit of money at the dollar is pretty strong right now so looks good!


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## Argonaut (Dec 7, 2010)

Hmm, methinks the anonymous CMF poster is a certain strawberry rhubarb.

One query: If one has an RRSP and a non-registered account at say, RBC, would it be prudent to gambit first in the non-registered account? I say this because one could avoid wasting contribution room and being able to write off the "loss" if any from commissions and the like. Then contributing the USD into the RRSP is done on a "pure" basis, and the broker can keep track of the exchange rate and everything for you.


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## humble_pie (Jun 7, 2009)

roybank ? oh i am happy for you ! could not be in a better place. Both the buy & the sell can be done online, instantly. As in bing. bang.

you want to choose your carrier stock on a super-quiet day. No news, no earnings, no looming dividend X dates. Deadsville.

the only risk is the few seconds between the fill of your buy order & execution of your sell order, which you will launch immediately. If you are lucky the market might even be rising, so your sell order will have nice breathing room. If not lucky, the market might be a few pennies lower but even so, the tiny loss will be a piffle compared to the FX fees a bank or a broker would charge.

btw be sure to choose an interlisted carrier stock in which you do *not* already have a position. (if you were to utilize a stock you already hold, you'd be into a capital gains/loss situation, which normally one wants to avoid.)


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## Ihatetaxes (May 5, 2010)

Ok so a bank or telco type of stock? Why not use the DLR/DLR.U that I am reading about people using? 

Thanks for the help.


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## humble_pie (Jun 7, 2009)

argo i've never had any roybank account so i can't really be sure. (i've gambitted at bmo, which runs on ADP as does rbc ... total success ... amazing to see how easy ... i also observe numbers of people in last couple of years posting in the internet about their roybank gambits & all saying that the operation was easy & successful.)

your point about paying the 2 gambit commissions outside the rrsp in order to preserve maximum room sounds good to me. If you do this, will the rbc rrsp record the CAD value of your USD contribution on the day you make it ?

someone else in cmf forum might come up w killer reasons why not to do what you are planning. I myself can't see any harm. Perhaps - just to dot every i & cross every t - you might want to ask the rbc representatives if there are any reasons against ?


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## humble_pie (Jun 7, 2009)

with a stock, the key thing is that it be liquid in both markets. I don't think bce is liquid enough in US markets. Telus is not interlisted - that TU on new york is not telus common, it's telus dot A, a non-voting class. To be quite technical, when gambitting you have to be sure that the CUSIP numbers are the same.

banks are good. I like TD, last i looked it had the highest volumes (on that day) on new york.

people have said suncor is good volume-wise. Myself i would myself avoid cnq & rim/rimm as these are too volatile.

as for DLR/DLR.U, they were invented for people who are clients of the ISM brokers. TDW, scotia, commerce, hkbc, others. Their online trading platforms do not permit immediate selling of an interlisted stock which a client has just bought, seconds before, in toronto.

this is why there is all the hoo-ha about phoning a licensed representative. The reps can override the blockage.

otherwise the tdw etc client has to wait several days for the stock purchase to settle, before he can phone to have it journalled over to US account. Enter DLR/DLR.U. These etfs were cleverly invented by horizons to handle the 5-day delay problem. DLR.U is pegged, so once a tdw client has bought DLR he can relax & wait his 5 days for settlement + journal, his exchange rate is not going anywhere.

but here's the catch. Horizons has a fee. It's low. But then it gets worse. There is also a spread in the DLRs, i believe it can be as high as 2%. Ouf. Why would you want to pay that kind of $$ to horizons, when with a nimble hop & skip you can zoom into & out of TD bank all by yourself, never paying one centime to anybody except for a pair of broker commish ...

besides, true gambitting is so fun. I love it when the risk window opens (as with option trading, or any kind of pair trades.) Who'd want to give that up, for a pair of stale 5-day-old Dollars ...


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## Sampson (Apr 3, 2009)

@ argo.
You can certainly do this. Whether it is advantageous obviously depends on the current exchange rate. If you contribute USD, RBCDI will report based on their posted rate. I don't know how they choose the rate for the day though.


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## humble_pie (Jun 7, 2009)

argo speaking of keeping commish costs outside rrsp whenever possible, so as to preserve room ... if you are going to buy a US security in rrsp as the end game but choose to gambit CAD --> USD in non-reg'd account first, why not then buy the ultimate US security in non-reg'd & then make a contribution to rrsp in kind ?

probably should contribute in kind right away, so the security will not have time to accumulate a capital gain (loss) history in non-reg'd account.


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## CanadianCapitalist (Mar 31, 2009)

humble_pie said:


> but here's the catch. Horizons has a fee. It's low. But then it gets worse. There is also a spread in the DLRs, i believe it can be as high as 2%. Ouf. Why would you want to pay that kind of $$ to horizons, when with a nimble hop & skip you can zoom into & out of TD bank all by yourself, never paying one centime to anybody except for a pair of broker commish ...


Spreads on DLR can get wide but I've never seen it as high as 2%. Right now, the bid-ask on DLR is 9.67/9.69. The spread on DLR.U is also 2 cents, which works out to 0.20%. DLR also has a MER of 0.50%. For a one week holding, the cost of the MER is 0.01%.


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## humble_pie (Jun 7, 2009)

CanadianCapitalist said:


> Spreads on DLR can get wide but I've never seen it as high as 2%. Right now, the bid-ask on DLR is 9.67/9.69. The spread on DLR.U is also 2 cents, which works out to 0.20%. DLR also has a MER of 0.50%. For a one week holding, the cost of the MER is 0.01%.



thanks so much for that correction. Totally my bad. Unbelievably bad. I am in the doghouse :hopelessness: hopefully not permanent.

still, doesn't 0.20% work out to $200 on 100k ? why would one give that up, if one could avoid ...

in DLR's favour, i rarely look at their quotes, but last time i did i saw a large volume, just for that day, which suggested to me that some institutions are exchanging their currencies via this pair of etfs.

another part of my thought is that the Dollars don't work so well when investor is exchanging USD-->CAD, because it's only DLR.U that is pegged, so investor has the 5 days of currency fluctuation exposure if he takes the slow train. Of course if investor is a bmo or roybank client, he could buy/sell his Dollars instantly. But if he's going to do this, then why not buy/sell any good interlisted carrier stock & save himself the spread.

i'm thinking learn to gambit from the getgo, so investor can exchange currencies in both directions, instead of relying on training wheels that go in one direction only ...


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## Ihatetaxes (May 5, 2010)

So I just called RBC to open a US account and they quoted me .9776 for up to $250k and a better rate for above $250k (waiting for them to email it to me). Am I doing any better than this by using a gambit?


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## CanadianCapitalist (Mar 31, 2009)

Ihatetaxes said:


> So I just called RBC to open a US account and they quoted me .9776 for up to $250k and a better rate for above $250k (waiting for them to email it to me). Am I doing any better than this by using a gambit?


The answer is no. TD trades at C$84.32 and USD $82.33. The exchange rate is 0.9763.


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## CanadianCapitalist (Mar 31, 2009)

humble_pie said:


> still, doesn't 0.20% work out to $200 on 100k ? why would one give that up, if one could avoid ...
> 
> in DLR's favour, i rarely look at their quotes, but last time i did i saw a large volume, just for that day, which suggested to me that some institutions are exchanging their currencies via this pair of etfs.
> 
> ...


I agree that gambitting buy DLR.U/sell DLR is not recommended due to currency risk. I also agree that the scenic buy DLR to sell DLR.U may not always be cost effective. However, I still take the DLR / DLR.U route whenever I'm exchanging say $5,000. Here's the comparison:

DLR/DLR.U = Two trades at $10 each. 2 cents spread on 500 shares. Total cost = $30.
TD.TO/TD = One trade at $10. One trade at $43. 1 cent spread on 60 shares. Total cost = $53.


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## humble_pie (Jun 7, 2009)

CanadianCapitalist said:


> I agree that gambitting buy DLR.U/sell DLR is not recommended due to currency risk. I also agree that the scenic buy DLR to sell DLR.U may not always be cost effective. However, I still take the DLR / DLR.U route whenever I'm exchanging say $5,000. Here's the comparison:
> 
> DLR/DLR.U = Two trades at $10 each. 2 cents spread on 500 shares. Total cost = $30.
> TD.TO/TD = One trade at $10. One trade at $43. 1 cent spread on 60 shares. Total cost = $53.



but he's at roybank ! gambits 100% online !! his 2 commish are @20 !!! plus it's more than 250k !!!!

apples
2
apples


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## humble_pie (Jun 7, 2009)

CanadianCapitalist said:


> The answer is no. TD trades at C$84.32 and USD $82.33. The exchange rate is 0.9763.



no ?

they quote him .9776 & you get .9763
never mind that i got .97618
(exchange rates change every minute)
still
the answer is no

??

even at .9763 wouldn't he save $325 ...


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## CanadianCapitalist (Mar 31, 2009)

humble_pie said:


> no ?
> even at .9763 wouldn't he save $325 ...


I missed the part where the poster is exchanging $250K. Sorry.


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## dave2012 (Feb 17, 2012)

I looked into this a while back with CIBC.

My notes say it works out to .85% buying USD stock with CDN when I buy via Investors Edge. I use the CIBC Forex service instead to exchange CDN for US which works out a bit less at .65%. Saves about $50 on each $25,000.


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## humble_pie (Jun 7, 2009)

dave so sorry but i didn't really understand your post

i'd bet you a serious amount of money, though, that *no* broker rate will ever be as favourable as the rate to be achieved via gambit trading.

you can see in the thread above. OP has obtained an excellent rate from roybank because the amount of currency to be exchanged is large. Still, he would do better if he gambitted.

parties with smaller amounts to exchange will always do best if they gambit.


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## GoldStone (Mar 6, 2011)

I agree with h_p, you can do much better than .65% if you gambit.

In fact, with a bit of luck, you can actually make a few bucks on the transaction.


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## dave2012 (Feb 17, 2012)

Well what do you know... had not thought of that one Humble! I'll be sure to take advantage of this one next time. Thanks Humble and GoldStone!


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## humble_pie (Jun 7, 2009)

dave2012 said:


> ... I'll be sure to take advantage of this one next time.



there you go. Study up. Never pay another FX fee for the rest of your life.

one thing i notice over the past few years. At least one big online broker has increased its FX fees for small amounts under $10,000 from a spread of 1.90% to a spread of 3%. Other brokers have done the same. This means that investors exchanging smaller amounts of USD/CAD, one-way, are paying 1.50% on each transaction. Ouch.

the hidden & secret extraction of FX fees on many kinds of dividends - even dividends paid by canadian companies - is another growing source of revenue for online brokers. More on this topic later.

bref, in recent years online discount brokers have not increased their commissions. They haven't cut their services, either, although presumably their costs have been going up.

what the brokers have done is vastly increase their FX fees in ways that clients cannot easily see or understand.


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## Argonaut (Dec 7, 2010)

The gambit didn't work on an RBC Direct Investing practice account. Though I imagine it is because of it being a practice account. After the dust has settled on settlement date, I am still long 900 shares of RY on the TSX and short 900 shares of RY on the NYSE. Hopefully it goes smoother in a real account. One thing I fault RBC for is not having distinct "sell" and "short" buttons.


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## humble_pie (Jun 7, 2009)

Argonaut said:


> The gambit didn't work on an RBC Direct Investing practice account. Though I imagine it is because of it being a practice account. After the dust has settled on settlement date, I am still long 900 shares of RY on the TSX and short 900 shares of RY on the NYSE. Hopefully it goes smoother in a real account. One thing I fault RBC for is not having distinct "sell" and "short" buttons.


i think you should discuss with rbc.

also, when exactly was settlement date ? is this practice trade past settlement yet ?

don't know roybank but the bmo platform might be comparable. 

at bmo, all is not neatly fetched, carried & paid for by settlement date. It takes an extra day or 2 after settlement day before all confusions vanish & every last share & penny retreats dutifully to its corner. But retreat they do.

ps my suggestion is do *not* try to short anything.
just buy & sell in the same account, but in the different currencies.

why no shorting ?
brokers don't want gambitters fooling around with their inventories of shares that are available for shorting.
those shares are for their short-selling customers. It's a profitable business for the brokers.
often there's only a limited quantity of shares available for shorting, so brokers don't want gambitters hogging em up.


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## Sampson (Apr 3, 2009)

Argonaut said:


> The gambit didn't work on an RBC Direct Investing practice account.


I've done it several times, in both registered and non-registered accounts so can confirm it is seemless (aside from what pie describes as the period waiting for the dust to settle). In fact, if you view using the 'intraday' accounts tab, you should see the buy and the sell (as negative units) highlighted in blue in your holdings list. 

It seems obvious, but just make sure you have the monies going into the correct account (USD or CAD), otherwise you will inadvertently impose the FX fee PLUS the transaction fee with no benefit.


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## Argonaut (Dec 7, 2010)

Settlement date was September 10, so maybe it will clear up. Like I said, I wish there was distinct sell and short buttons so one can avoid shorting. As is, there's only a sell button.

EDIT: Negative shares do not show blue so I think this may be a practice account quirk.


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## humble_pie (Jun 7, 2009)

Argonaut said:


> Settlement date was September 10, so maybe it will clear up. Like I said, I wish there was distinct sell and short buttons so one can avoid shorting. As is, there's only a sell button.


the sell button is all you need for gambitting.

i think - Sampson would know - that when you get to the real account itself, not the practice version, a short account will be available for you. It might be that client has to be approved for shorting, or at least have provable margin, is why they don't offer it in the practice account.


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## blin10 (Jun 27, 2011)

i've done it probably 50 times by now in royal bank DI with royal bank stock, saved a ton of money for sure...


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## GoldStone (Mar 6, 2011)

Argonaut said:


> The gambit didn't work on an RBC Direct Investing practice account. Though I imagine it is because of it being a practice account. After the dust has settled on settlement date, I am still long 900 shares of RY on the TSX and short 900 shares of RY on the NYSE.


I had the same experience in the RBC DI practice account a few years back. I called customer service for an explanation. It's really simple. They have a back office team that manually reconciles short/long positions. The report they get doesn't include practice accounts, to reduce the amount of manual work they have to do.


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## Argonaut (Dec 7, 2010)

Thanks GoldStone, that's exactly what I was looking for.


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## Ihatetaxes (May 5, 2010)

Thank you Federal reserve. Dollar now nicely over 1.03 just in time for some big savings on my exchange.


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