So here is the follow-up on my implementation of “Norbert’s Gambit”. I needed about USD 5,000, and according to the rates posted on my bank’s site at that time, it would cost me CAD 7,145.
My first step was to purchase 500 units of DLR in my brokerage margin account (each unit represents USD 10). The (ask) price in CAD was 13.88, and the commission CAD 9.95, for an all-in cost of CAD 6,949.95. I immediately sold 500 units of DLR.U which is equivalent to DLR, but priced in USD. The (bid) price in USD was 9.96, and the commission USD 9.95, netting me USD 4,970.05.
The results:
USD 4,970.05 cost CAD 6,949.95, or CAD 1.3984 per USD (equivalent to USD 0.7151 per CAD). For that same CAD 6,949.95, I would have received only USD 4,863.58 at the bank FX rate at that time of USD 0.6998 per CAD (equivalent to CAD 1.4290 per USD). The savings: USD 106.47. The effective commission: USD 29.95 or 0.6% – a fraction of bank’s effective commission of 2.14%.
Here are the calculations:
