Norbert's Gambit - which online brokerage is best?

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Wing
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Norbert's Gambit - which online brokerage is best?

Post by Wing »

I have a National Bank online brokerage account, to do a NG transaction, it requires the followings:
1. Wait before the BUY DLR is settled before one can do a SELL in DLR.U (4 days)
2. One needs to call to have the DLR journal over

I know RBC and BMO online brokerages can have a NG transaction done without calling/emailing. Does one need to wait 4 days as well at RBC and BMO?

Also, can TDDI do that without any human assistance? I'm tempting to open another online brokerage account and considering which one to go with when I may have more NG transactions going forward.
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Re: Norbert's Gambit - which online brokerage is best?

Post by adrian2 »

Wing wrote: 13 Dec 2017 17:08 Also, can TDDI do that without any human assistance? I'm tempting to open another online brokerage account and considering which one to go with when I may have more NG transactions going forward.
My comments are for doing a NG with interlisted stocks, not DLR, it is (significantly) cheaper not to use DLR.

At TDDI, in a non-registered account, you can do it yourself if you have shorts enabled (you do have to call after settlement, but it's not time critical and it does not affect the realized exchange rate).
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Re: Norbert's Gambit - which online brokerage is best?

Post by Peculiar_Investor »

FWIW, Settlement changed to T+2 effective the beginning of September 2017, so the journaling delay is reduced one business day.
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Re: Norbert's Gambit - which online brokerage is best?

Post by ockham »

Wing wrote: 13 Dec 2017 17:08
I know RBC and BMO online brokerages can have a NG transaction done without calling/emailing. Does one need to wait 4 days as well at RBC and BMO?
At BMOIL, you do NG in under 4 minutes (i.e., basically the amount of time it takes to type out your buy/sell instructions). Buy an interlisted stock in Toronto. As soon as your buy order fills, you sell the same # of shares in New York, choosing US$$ as your "sell" settlement funds. Over and done. No phone call required*.

I believe RBCDI works the same way, though I've not done a NG at RBCDI.

* A few times, BMOIL has charged interest to the account. Never understood why or how it's calculated. When I call in about it, the rep also doesn't understand why or how it's calculated. S/he promptly reverses the charge.
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Re: Norbert's Gambit - which online brokerage is best?

Post by Mordko »

adrian2 wrote: 13 Dec 2017 18:10
My comments are for doing a NG with interlisted stocks, not DLR, it is (significantly) cheaper not to use DLR.
Wonder what "significantly" comes to in practice. At Questrade buying DLR is free but you have to pay commission when you sell. If you use stocks for NG then there is commission to pay when you buy. I usually initiate journalling via a chat. You then have to wait for a few days but the exchange rate is locked as soon as you bought DLR.

The unfortunate part of the wait is that I often have to pay capital gains.
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Re: Norbert's Gambit - which online brokerage is best?

Post by fireseeker »

ockham wrote: 13 Dec 2017 19:31 At BMOIL, you do NG in under 4 minutes (i.e., basically the amount of time it takes to type out your buy/sell instructions).
I think I've done it less than 60 seconds. It's amazingly easy at BMOIL.
(Thanks, again, to Norbert for saving all of us hundreds or thousands of dollars!)
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Re: Norbert's Gambit - which online brokerage is best?

Post by BC_Doc »

Very easy with RBC-Direct Investments. Can buy and sell within seconds to a minute or two. Haven’t ever had a problem carrying out NG— have used it to convert $1-2M to USD and back over the years.
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Re: Norbert's Gambit - which online brokerage is best?

Post by adrian2 »

Mordko wrote: 13 Dec 2017 20:18
adrian2 wrote: 13 Dec 2017 18:10
My comments are for doing a NG with interlisted stocks, not DLR, it is (significantly) cheaper not to use DLR.
Wonder what "significantly" comes to in practice. At Questrade buying DLR is free but you have to pay commission when you sell. If you use stocks for NG then there is commission to pay when you buy. I usually initiate journalling via a chat. You then have to wait for a few days but the exchange rate is locked as soon as you bought DLR.
At least for the amounts I'm doing NG, the bulk of the cost is not the commission per se, but the bid / ask spread.

DLR is around $10. I have not closely watched its bid / ask spread, but when I looked at it in the past, it was often more than a penny.
An interlisted stock trading around $100, with a penny spread, would have the intrinsic cost at least 10 times cheaper (possibly 20 or more).

I do not have an account with Questrade and have no current plans to. YMMV.
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Re: Norbert's Gambit - which online brokerage is best?

Post by AltaRed »

My understanding is the NGs vary a bit at discount brokers depending on the back end platforms the discount brokers use. Apparently RBC and BMO use the same platform and thus doing an NG is exactly the same at those 2 brokerages. It is entirely seamless at those brokerages. Picked this info up from another forum where a member was (or might still be) in the industry.
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Re: Norbert's Gambit - which online brokerage is best?

Post by Mordko »

At least for the amounts I'm doing NG, the bulk of the cost is not the commission per se, but the bid / ask spread.
If you are changing over ~$20K, then ^ true. I have changed >$100K and <$3K, so it averages out. Interlisted stocks have advantage for really large amounts (7 digits) while no-commission DLR means one can exchange dividends as soon as they are paid in without having to wait for them to accumulate.

In summary, using inter-listed stocks at one of the big banks or DLR at discount brokerages 6 vs 3+3. In both cases we are talking about fractions of 1 percent, and unless $ millions are being exchanged, the delta is insignificant.
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Re: Norbert's Gambit - which online brokerage is best?

Post by Ken »

A bit off topic but I am trying to speak to an iTrade agent in order to do a gambit or discuss the best method of doing a gambit. Gave up after an hour on hold yesterday afternoon. 30 minutes and counting so far this morning. Initial wait times were both estimated simply "more than 10 minutes". So glad that I am gradually closing this account out. At least RBC-DI has a callback feature.

Update: discovered that iTrade has online chat well hidden on the website. Got my questions answered. I’ll post it all later today
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Re: Norbert's Gambit - which online brokerage is best?

Post by Ken »

I don't know which brokerage is best for running Norbert's Gambit, but here is what I have found out about using Scotia iTrade in a non-registered margin account. I won't be doing this until January so we'll see if it actually works then.

First, contacting them by phone for general inquiries is hopeless. Apparently if you choose the menu path to a trader then you get a priority.
Also, I discovered online chat, but you can only access the chat window from the trade tab once you have selected your account or from the communication centre once you have selected 'Scotia iTRADE' as your message subject.

The method I am using to convert USD to CAD is to sell RY short on the CAD side, then buy it on the US side with the US cash I'm converting, then journal RY shares from USD to CAD side to zero out the short.

I was told by the online chat guy to
1. phone a trader to exercise the short and keep the guy on the phone
2. immediately do the buy (at market) on the US side while he is on the phone
3. then get him to journal the shares across. No need to wait for the trades to settle
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Re: Norbert's Gambit - which online brokerage is best?

Post by SQRT »

adrian2 wrote: 13 Dec 2017 18:10

At TDDI, in a non-registered account, you can do it yourself if you have shorts enabled (you do have to call after settlement, but it's not time critical and it does not affect the realized exchange rate).
This is where/how I do it. I think it works well. I short first in US account then go long in Canadian. Always use CM. Do have to call and journal across the shares. Have done maybe 20 of these all for mid to high 5 figures. Probably saved $10-20k in total. Yes, thanks Norbert.
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Re: Norbert's Gambit - which online brokerage is best?

Post by crimsondr »

Hi all,

Question about performing NG with BMOIL. When performing the transaction I switch up the currency between US and CAD, depending on the direction I want to convert. My question is do you use the same stock or the respective market stock? Ie. CM for the CAD transaction and CM:US for the USD transaction?

Also, is this possible in a registered account?

Thanks.
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Re: Norbert's Gambit - which online brokerage is best?

Post by AltaRed »

I've not done it in BMO IL but I would say yes to CM for the CAD transaction and CM:US for the USD transaction.

You cannot go short in a registered account so you have to buy the shares first and then sell.
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Re: Norbert's Gambit - which online brokerage is best?

Post by crimsondr »

I'm not sure that would work because the system should consider CM:US as a separate stock from CM. So it would think you're trying to short a stock. I could be wrong. Looking for anyone with actual experience performing an NG in BMOIL RRSP account.

Thanks.
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Re: Norbert's Gambit - which online brokerage is best?

Post by AltaRed »

CM and CM:US is the same stock with the same CUSIP number. It is just a matter of which exchange you want to sell it on. You can pick the exchange in which you wish to buy and sell as part of the 'equity order' dialog box.

Example of same CUSIP stock: I bought AQN with CAD on the CAD side of my BMO IL account. The daily stock prices were shown in CAD when it settled. I then journaled it over to the USD side of my account because its dividends are in USD. The only thing that changed is daily stock prices were now shown in USD.
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Re: Norbert's Gambit - which online brokerage is best?

Post by crimsondr »

Thanks. In BMOIL I do not see an option for exchange, only settlement currency. So if CM and CM:US are actually the same CUSIP I guess the difference is the exchange that the transaction is routed through. I will have to try it out.

Thanks!
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Re: Norbert's Gambit - which online brokerage is best?

Post by formerpatriot »

A related question:

I understand that if I wanted to convert 80K USD to CAD, it would be a good idea to use NG.
But if I have only 12K USD that I want to convert to CAD, is it still a good idea?
What about 5K USD?
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Re: Norbert's Gambit - which online brokerage is best?

Post by formerpatriot »

P.S.
The alternative is to do a currency exchange from my USD non-registered account to my CAD non-registered account. The exchange rates at the brokerage are better than at the bank.
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Re: Norbert's Gambit - which online brokerage is best?

Post by AltaRed »

formerpatriot wrote: 04 Jun 2019 11:50 P.S.
The alternative is to do a currency exchange from my USD non-registered account to my CAD non-registered account. The exchange rates at the brokerage are better than at the bank.
That is what my ex-spouse does. She doesn't have the skills/desire to do a NG. In her case, she waits for a significant amount to exchange, e.g. $50-100k, and then phones her relationship manager (iTrade) and asks for a preferred rate from the currency desk, and gets what I understand is just under 1%. That's not bad if that is also timed with a weak loonie. I missed telling her to do that in December when the loonie approached 73 cents. I've since told her I'd let her know again if/when the loonie goes <73.5 cents. A one cent difference will pay that 1% commission.
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Re: Norbert's Gambit - which online brokerage is best?

Post by pmj »

NG costs C$10 plus US$10, or less if you have better commission rates. Let's call that US$18. US$18 is 0.15% of US$12k. Brokerage vig is sure to be more than that. NG is just about always cheaper.
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Re: Norbert's Gambit - which online brokerage is best?

Post by fireseeker »

crimsondr wrote: 04 Jun 2019 11:39 Thanks. In BMOIL I do not see an option for exchange, only settlement currency. So if CM and CM:US are actually the same CUSIP I guess the difference is the exchange that the transaction is routed through. I will have to try it out.

Thanks!
I have gambited in registered accounts at BMOIL several times.
The :US suffix simply indicates that the stock is currently on the US side of the account. As AR said, CM and CM:US are the same stock.
When you gambit, you need to pay particular attention to sync two things for each transaction:
The third field listed on the buy/sell page is "market," which gives you the choice of Canadian or US.
In the next section, the third field is "settlement funds," which gives you the choice of Canadian dollar or US dollar.
You must take care to align those two choices.

An example:
You buy CM on the "Canadian" market and you select "Canadian dollars" as your settlement funds.
Then you immediately sell the shares on the "US" market selecting "US dollars" as your settlement funds.

Your gambit of Canadian dollars to US dollars is now complete.
However, you will still see two entries (one negative) in your holdings list until the trades settle in two days when the positions are reconciled.
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Re: Norbert's Gambit - which online brokerage is best?

Post by crimsondr »

fireseeker wrote: 06 Jun 2019 22:54
crimsondr wrote: 04 Jun 2019 11:39 Thanks. In BMOIL I do not see an option for exchange, only settlement currency. So if CM and CM:US are actually the same CUSIP I guess the difference is the exchange that the transaction is routed through. I will have to try it out.

Thanks!
I have gambited in registered accounts at BMOIL several times.
The :US suffix simply indicates that the stock is currently on the US side of the account. As AR said, CM and CM:US are the same stock.
When you gambit, you need to pay particular attention to sync two things for each transaction:
The third field listed on the buy/sell page is "market," which gives you the choice of Canadian or US.
In the next section, the third field is "settlement funds," which gives you the choice of Canadian dollar or US dollar.
You must take care to align those two choices.

An example:
You buy CM on the "Canadian" market and you select "Canadian dollars" as your settlement funds.
Then you immediately sell the shares on the "US" market selecting "US dollars" as your settlement funds.

Your gambit of Canadian dollars to US dollars is now complete.
However, you will still see two entries (one negative) in your holdings list until the trades settle in two days when the positions are reconciled.
Thanks for the explanation! I originally did not see the option for "market" because I was using the quick trade window. BMOIL is new to me and I have never used it to execute a trade, previously I was using Questrade.

For your example, when I sell on the US market, does it matter if I sell CM or CM:US, assuming for the first step I bought CM?
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Re: Norbert's Gambit - which online brokerage is best?

Post by fireseeker »

crimsondr wrote: 07 Jun 2019 00:06 Thanks for the explanation! I originally did not see the option for "market" because I was using the quick trade window. BMOIL is new to me and I have never used it to execute a trade, previously I was using Questrade.

For your example, when I sell on the US market, does it matter if I sell CM or CM:US, assuming for the first step I bought CM?
If you buy CIBC on the Canadian market, you will not see any CM:US in your account. When you go to sell, you will be selling your CM holding -- but you will be instructing BMOIL to sell it on the US market to settle in US funds.

(One caveat about your question: You do not want to gambit a stock you already own. So, if you have some CM -- whether on the Canadian or US side -- pick a different stock to gambit.)
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