Since they began offering commission-free ETF trades, National Bank Direct Brokerage (NBDB) has become the cheapest big bank to invest with (as long as you are buying or selling at least 100 shares of a Canadian-listed ETF).
This is welcome news for seasoned DIY investors who have mastered the Norbert’s gambit strategy to cheaply convert their Canadian dollars into US dollars (as they can now generally avoid the two additional trading commissions required for the transaction).
For the rest of you newbie Couch Potato investors, I’ve put together a video tutorial that will make your first gambit a successful one. In the example, I convert about 8,000 Canadian dollars into US dollars within my RRSP account (I’ve also included step-by-step instructions below the video).
The first step is to purchase shares of the Horizons US Dollar Currency ETF (DLR). The fund invests in US dollar cash equivalents, but can be purchased with your Canadian dollars.
In order to determine the number of shares of DLR that you would like to purchase, just take the $8,000 CAD that you would like to convert and divide by the current ask price, which is $13.22 in our example – this equals 605 shares (just round down to the nearest whole share).
As you are purchasing at least 100 shares of a Canadian-listed ETF, the trading commission will be $0.
Before proceeding to the second step, you’ll need to wait four business days after purchasing DLR. As we purchased DLR on March 31, 2017, we will need to wait until April 6, 2017 in order to proceed to the next step (Note: The investment industry is scheduled to implement a T+2 settlement cycle beginning September 5, 2017, so you will soon be able to complete the gambit in one less business day).
When I called National Bank, I explained to the trader what I was trying to do, and there were no issues at all. After the trader has completed the request, as them to include a note on the account that will allow you to sell 605 shares of the Horizons US Dollar Currency ETF (DLR.U) today (the trader also told me to wait two minutes before placing my trade).
DLR.U is the exact same security as DLR. The only difference is that DLR.U is transacted in US dollars, while DLR is transacted in Canadian dollars.
To verify that the trade has been completed successfully, hover over the Accounts tab at the top left of the page and click on Asset Details.
You should now see a positive US dollar cash balance, as well as a negative quantity of DLR.U shares (these will disappear once National Bank processes your transfer request). You are now free to purchase US-listed ETFs with the cash available in your US dollar RRSP account.