Every time you convert Canadian dollars to US dollars through your brokerage, you typically lose 1.5–2% to the currency spread. On a $20,000 conversion, that's $300–$400 gone before you've bought a single share. Norbert's Gambit is a perfectly legal technique used by savvy Canadian investors to convert currencies for a fraction of that cost — often less than 0.2%.
What Is Norbert's Gambit?
Norbert's Gambit exploits a simple fact: some securities trade on both the TSX (in CAD) and the NYSE/CBOE (in USD) and represent the same underlying asset. By buying the CAD version and selling the USD version, you effectively convert currency at the market exchange rate, paying only the bid-ask spread rather than a brokerage FX conversion premium.
The most commonly used security for this purpose is DLR/DLR.U — Horizons USD/CAD ETF, which holds US dollars and trades on the TSX in both Canadian and US dollar versions.
How Norbert's Gambit Works: Step-by-Step
Purchase shares of DLR (CAD) in your Canadian dollar account. DLR holds US dollars and simply reflects the CAD/USD exchange rate. Check the current price and buy as many units as needed to achieve your desired conversion amount.
DLR shares must settle before you can journal them. This typically takes 2 business days. Do not sell DLR during this waiting period.
Contact your brokerage (phone or online request) to "journal" your DLR shares from your Canadian dollar account to your US dollar account as DLR.U. This is the key step — the same physical ETF units are moved across currency accounts. Most brokerages can do this same-day.
Sell DLR.U in your US dollar account. You now have USD proceeds. The total currency conversion cost is only the bid-ask spread on DLR (typically 0.01–0.02 per share) plus trade commissions.
Use your USD proceeds to buy VOO, VTI, IVV, or any US-listed security you want at your brokerage.
Cost Comparison
| Method | Typical Cost | On $20,000 Conversion |
|---|---|---|
| Standard FX (brokerage auto-convert) | 1.5–2.0% | $300–$400 |
| Norbert's Gambit | 0.1–0.3% | $20–$60 |
| Interactive Brokers FX | 0.15–0.20% | $30–$40 |
Which Brokerages Support Norbert's Gambit?
| Brokerage | NG Available? | Journaling Method | Notes |
|---|---|---|---|
| Questrade | Yes | Phone or online | Most popular platform for NG |
| TD Direct Investing | Yes | Phone only | Works well, phone required |
| RBC Direct Investing | Yes | Phone only | May charge journaling fee |
| National Bank Direct | Yes | Phone or online | Free journaling |
| Wealthsimple Trade | No | N/A | No USD account, auto-converts at 1.5% |
| Interactive Brokers | Not needed | N/A | Native FX already 0.15–0.20% |
Norbert's Gambit in an RRSP
Norbert's Gambit works in registered accounts (TFSA and RRSP) as well as taxable accounts. Using it in an RRSP is particularly valuable because once you've converted to USD, you can buy US-listed ETFs like VOO (0.03% MER) and avoid the 15% US dividend withholding tax — a double win on efficiency.
Potential Risks and Considerations
- Settlement timing: DLR must settle before journaling. Don't rush this step.
- DLR price risk: During the 2 days you hold DLR, the CAD/USD rate can move. This is the same risk as any FX transaction — typically minor over 2 days.
- Wash trading concern: Some people wonder if the CRA views NG as a wash trade. It is not — NG is a recognized, legitimate tax-planning technique. The conversion is real.
- Minimum size: For conversions under $5,000, the commission cost may outweigh the savings versus a standard FX conversion.
Save in CAD While You Plan Your US Investments
KOHO earns you high interest on your Canadian savings while you accumulate enough to make Norbert's Gambit worthwhile.