In attempt to avoid the usual 1.5-2% exchange fees levied by brokers, I perform Norbert's gambit: I purchase DLR.TO in CAD (Canadian dollars) from TSX, journal it over to DLR.U.TO, and then sell the exchange-traded fund (ETF) to obtain USD (United States dollars).

But when performing this procedure, you must wait 3 days for the purchase to settle, plus 2 days for the journaling procedure to take place. By the end of the 5 days, the ETF price might drop substantially (it dropped $12.33 to $12.12 in one day in my example). That's a (0.21/12.33) 1.7% reduction in the price of the ETF already. It is currently at $12.06 which is 2.2% lower.

When I sell the ETF after 5 days to obtain USD, I'll be selling it at a market price lower than what I bought it for and end up losing more money than I would have if I just paid the 2% exchange rate.

Can someone please clarify if Norbert's gambit is the optimal procedure to exchange CAD to USD? It seems it works well if the ETF market price is steady but not so if it drops.

  • An ETF is exchange traded. It may take time for the settlement, but there's no reason that your order wouldn't settle for the market price when you executed the order. Did you use mutual funds instead of ETFs? Sep 7, 2017 at 17:52
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    I used DLR.TO which is an ETF. I followed this: finiki.org/wiki/Norbert%27s_gambit
    – Beep
    Sep 7, 2017 at 17:55
  • There is something incredibly wrong with this, but I can't work it out :O
    – Fattie
    Aug 22, 2018 at 5:28
  • The linked article seems - incoherent. The writer does not even understand the difference between things like fees, spreads, rates, etc.
    – Fattie
    Aug 22, 2018 at 5:30
  • Among the really spectacular errors in this whole milieu .. :) .. i think there is yet again the "fallacy of price" here. There is no " ' " real " ' " exchange rate for USD/CAN, any more then there is a " ' " real " ' " price for the house you re living in.
    – Fattie
    Aug 22, 2018 at 5:33

8 Answers 8


When you hold units of the DLR/DLR.U (TSX) ETF, you are indirectly holding U.S. dollars cash or cash equivalents. The ETF can be thought of as a container. The container gives you the convenience of holding USD in, say, CAD-denominated accounts that don't normally provide for USD cash balances. The ETF price ($12.33 and $12.12, in your example) simply reflects the CAD price of those USD, and the change is because the currencies moved with respect to each other.

And so, necessarily, given how the ETF is made up, when the value of the U.S. dollar declines vs. the Canadian dollar, it follows that the value of your units of DLR declines as quoted in Canadian dollar terms. Currencies move all the time.

Similarly, if you held the same amount of value in U.S. dollars, directly, instead of using the ETF, you would still experience a loss when quoted in Canadian dollar terms.

In other words, whether or not your U.S. dollars are tied up either in DLR/DLR.U or else sitting in a U.S. dollar cash balance in your brokerage account, there's not much of a difference: You "lose" Canadian dollar equivalent when the value of USD declines with respect to CAD.

Selling, more quickly, your DLR.U units in a USD-denominated account to yield U.S. dollars that you then directly hold does not insulate you from the same currency risk. What it does is reduce your exposure to other cost/risk factors inherent with ETFs: liquidity, spreads, and fees. However, I doubt that any of those played a significant part in the change of value from $12.33 to $12.12 that you described.

  • This answer doesn't address the main point of the gambit, which is losing 1.5%-2% on exchange fees.
    – Beanluc
    Sep 7, 2017 at 20:39
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    @Beanluc This answer properly explains why the loss existed [it existed because for a period of time, the OP effectively held USD, and the CAD value of that USD fluctuated before the amounts were taken out]. It then explains that Norbert's Gambit does not reduce this risk, it simply reduces the need for paying poor fees / spreads on "traditionally" converting currency. Sep 7, 2017 at 20:51
  • Yeah, the concept of avoiding broker fees by buying and selling an ETF somehow sounds to me like a logical short circuited fart. Buying and selling an ETF will require a broker, hence still incur broker fees.
    – TomTom
    Aug 13, 2018 at 8:03
  • @Beanluc , the answer i think does flawlessly explain exactly that.
    – Fattie
    Aug 22, 2018 at 5:31
  • @TomTom, does your broker charge the same fee for everything? Mine certainly doesn't. Buying and selling ETF only cost a fixed $7-$9 fee per transaction no matter how much stock I buy, whereas currency exchange fee is a percentage. Do you see the difference?
    – Kenny Ho
    Apr 11, 2019 at 19:24

I think your concern is equivalent to someone performing a currency exchange on Monday at one rate, and then wishing they had done it the following Friday because the exchange rate became more favorable over the week, so they've ostensibly "lost" money.

The moment you buy the DLR, you're locked in at (very close to) the spot exchange rate, since DLR and DLR.U are exactly the same security - DLR.U is simply DLR transacted in USD (they have the same legal entity identifier).


The price of DLR is directly proportional to the exchange rate and is constantly on the move, whereas DLR.U essentially remains at $10 USD regardless of the DLR price and is certainly constant over the transaction period of Norbert interest. This is a key point to your question; DLR is actually defined as the cost in CAD of $10USD. Had you sold the DLR in your CAD account, you'd have lost (or gained) money, but the goal is not to make (or lose) a quick buck, but to exchange currencies in the most efficient way possible. Once you purchased it, you had $10 USD regardless of any change in DLR's value. So your statement:

"When I sell the ETF after 5 days to obtain USD, I'll be selling it at a market price lower than what I bought it for".

isn't correct. You'll be selling it at $10 USD the same as you bought it for, in the same way that if I bought $10USD on Monday and paid zero fees i.e. the "optimal procedure", it would still be worth $10USD on Friday, but might be worth more or less in CAD. This change in Canadian value is due to the currency fluctuation ONLY, and has nothing to do with the buying and selling process - which as we know is the best possible procedure (exchanging with absolutely zero fees and risk).

So to answer your ultimate question, I believe there is no procedure that is more optimal than Norbert's Gambit other than finding some product in Canada that you can buy here in CAD and then sell in the US for more USD than the currency exchange rate (utilities, education, healthcare or beef perhaps?), without spending any money in the process (or at least less than two trades' worth).


There's a possibility to lose money in exchange rate shifts, but just as much chance to gain money (Efficient Market Hypothesis and all that). If you're worried about it, you should buy a stock in Canada and short sell the US version at the same time. Then journal the Canadian stock over to the US stock exchange and use it to settle your short sell. Or you can use derivatives to accomplish the same thing.

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    The short sell is an interesting option, but often closed to investors who are trading in tax-sheltered accounts like RRSPs and TFSAs that don't permit short sales. Sep 7, 2017 at 19:27
  • Also, short selling is risky if the stock doesn't behave the way you intended for it to. When you're long a stock, assuming you didn't borrow money to buy it, the worst case scenario is that you lose all the money that you put into the stock, plus fees. When you're shorting a stock, the potential loss is in theory unlimited.
    – user
    Sep 7, 2017 at 20:23
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    @MichaelKjörling, if the idea is that this particular fund is no more risky and no different than simply holding dollars, how is the short position any different or magically more risky? On what planet is the dollar going to rise to infinity or fall to zero? And if that occurred, on what planet would you be concerned about your currency arb trade more than the zombie apoclypse that must be underway?
    – quid
    Sep 7, 2017 at 20:42
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    @quid I agree that what you describe is unlikely to happen. However, Accumulation did talk about stocks. (Come to think of it, I'm not at all sure that doesn't make this a non-answer.)
    – user
    Sep 7, 2017 at 20:45
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    The idea is that your short position on one exchange is backed by your long position in the other exchange. There's still some risks, such as counterparty and margin calls, but they're rather small. If you're still worried, buying a put should address both that and the tax shelter issue. And given that the question is about Norbert's Gambit, I don't see how talking about stocks is a non-answer. Norbert's Gambit in general deals with stocks, and the OP was discussing stocks tied to currency values. Sep 8, 2017 at 15:26

You need to buy a dual listed stock. Forget about being bullish or bearish, it doesn't matter. You need tons of liquidity and tight bid asks. Buy the USD stock and sell the Canadian short the same number of shares. Should be 10 bucks a trade. YES you still have the currency risk until it settles. But if you want to minimize that risk sell an in the money put or call of the nearest duration for the dollar amount (the currency ie cad versus usd or vice versa. This will cost you (think insurance) but minimal. AND if you do it enough forget about it. Someone above said it will average out (win some lose some for the net same). They are correct.

  • It's naive that this was voted down. The answer is totally correct and "inside the action".
    – Fattie
    Aug 22, 2018 at 5:31

I find in general, Norbert's gambit makes financial sense for everything above about 3K assuming the two $10 trade fees one pays. TD now allows you to journal shares over without ever talking to a broker using the transfer shares feature. Depending on how deep your brokerage/bank digs, you save between 2k and 3K per 100k on both in and out transactions.

There is a small risk of big change in the rate during the 5 days it takes both sides of this to settle. Depending on direction of rate move there is also "risk" of making a paper gain as I did when moving 100k. Your paper loss is claimable as capital loss as your paper gain will carry tax liability for capital gains. The broker will send you a slip at tax time.

  • If the mechanics of this process is sound, short one and buy the other, simultaneously (on a $ for $ basis). The cost will be the spreads, the commissions and short term borrow costs. If that is less than the exchange fee, it's a winner and avoids price risk. Jul 2, 2019 at 15:22

Can someone please clarify if Norbert's gambit is the optimal procedure to exchange CAD to USD?

I'm not sure I'd call an arbitrage trade the "optimal procedure," because as you point out you're introducing yet another point of risk in to the transaction. I think buying the foreign currency for an agreed upon price is the "optimal procedure."

If you must use this arbitrage trade, try with a government bond fund; they're typically very stable.

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    The ETF mentioned, DLR/DLR.U on the TSX, holds cash in U.S. dollars. It would necessarily be more stable than a government bond fund, which may fluctuate with changes in interest rate. The fluctuation the OP is concerned about is the CAD/USD rate during the time it takes the trades to settle and journaling to occur. Sep 7, 2017 at 19:16
  • @ChrisW.Rea Fair enough, I still think this isn't the "optimal procedure, " all you need for this to work is a low volatility fund that trades in both currencies. If the dollar fund is too volatile, look for something less volatile, long term treasury/national debt funds are typically very stable while this dollar fund seems to move quite a bit.
    – quid
    Sep 7, 2017 at 19:27
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    But the volatility in question is the currency exchange rate itself. That won' t go away no matter what the other dual-quoted security is. Sep 7, 2017 at 19:28
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    @ChrisW.Rea, again, that's why I think arbitrage is not the "optimal procedure" to convert currency.
    – quid
    Sep 7, 2017 at 19:29
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    From the investor's perspective, I wouldn't describe it as arbitrage at all. The ETF is holding USD cash equivalents. And so, in buying it, you're buying USD. The layer of indirection lets one get around Canadian broker foreign exchange fees that are absolutely terrible. Converting your brokerage account CAD to USD requires you to pay your broker's fees. The ETF spread is thin in comparison. If there is arbitrage taking place, it's probably the folks at the other end of the transactions who can create and redeem units of DLR/DLR.U. Sep 7, 2017 at 19:39

In attempt to avoid the usual 1.5-2% exchange fees levied by brokers, I perform Norbert's gambit.

I'd rather follow below listed steps:

  1. One time step - Open equivalent US$ account with same broker, if you don't have one.
  2. In a CAD$ account buy a stable stock for which you are bullish and which trades on both side of the border e.g. TD, RY etc.
  3. Call your broker to transfer the stock to your US$ account. They should do it for free.
  4. Sell your stock in US market and receive US$.

DLR.TO takes about 1pct on the spread also. I put my order in for 1000 shares and the spot was 1.2091 so in theory a 1000 should cost me 12091.xx...But my total came to 12201.xx +9.99 commission I guess this is due to the ETF having ECN and mer fees.

  • You made a mistake. The USD units, DLR.U, are trading around USD10.07. Only if the USD units were exactly at 10.00 would your "in theory" estimate make sense. You'll need to look at what you actually realize when you sell on the USD side to have the correct denominator for calculating the effective currency exchange rate. May 11, 2021 at 15:40

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