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With my work I get paid in USD every month from multiple sources. I move it through my RBC USD personal account and transfer it to my online brokerage account @ Scotia iTrade.

The amounts I'm dealing with are upwards of $10,000 USD/month.

What I'm asking is the best way to convert the USD to CAD each month to pay bills and such. Also any ideas on what I should do with the money to passiblely earn a little more coin is much appreciated!. The excess money I either put in US Stocks in iTrade's USD cash optimizer account which pays 0.065%. I know the ING Direct USD savings account (which I have some money) in as well pays 0.075%, but that's pretty much the highest I've found.

I've read this thread about buying interlisted stocks in USD and have them journaled and sell them in CAD. Assuming the market stayed in the same place, you would save a minimum of 1.5%. However, I talked to iTrade and they said the trade would have to place the trade, let it settle (3 business days) and then ask them to journal it which would take 1 additional business days = 4 business days. A lot can happen to a stock in that amount of time. However, if it's a stock you already own, or want to own and think it is decent value, I suppose you just earned yourself and 1.5% discount. Sound right?

My other methods of converting USD to CAD is through PayPal which I can usually move at 1.3-1.5%. If the USD is in my RBC account, I can also move it through XE.com which is consistently 1.5%+.

Again, any other ideas on converting this amount of money each month? Also, any ideas on what to do with the USD that I would rather notinvest?
 

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it doesn't sound quite right. Gambitting is a fairly complex strategy easily carried out by pairs traders but perhaps daunting to some without pair trading experience.

an important component of the strategy is understanding how each online broker's trading platform is configured, in order to understand what can & cannot be accomplished.

for example, tdw's rrsp trading platform permits seamless, perfect online gambitting, as one poster in this forum has recently shown so brilliantly.

however, the same tdw trading platform can and does lead to trouble for parties attempting to gambit in tdw cash & margin accounts. This is why the posted messages for tdw are mixed, with some tdw clients being refused outright by td trading reps.

the reported remarks from scotia itrade are also typical of the blocks that can be presented to traders attempting to gambit. Among the problems that the brokers legitimately face are the 3-day settlement period, and also the rule against shorting the box, ie rules that prevent an investor from being both long & short the same stock in same account.

there is no Giant Manual In The Sky that tells investors which platform at which brokerage will be able to execute a gambit pair of trades. However, some of the solutions include shorting the stock first in the desired currency, then buying the stock in the opposite currency in a different account, which will eventually be journalled to cover the short position. However, some online brokers charge a fee to journal between accounts.

another solution, which would take longer to put in place but will be far simpler to operate once it's up & running, will be to conduct partial or half-gambits. In other words the investor would buy canadian interlisted stocks on new york with US dollars. He will never overpay for these stocks, because the arbs always keep the prices in both markets picked to the bare bone, which is the wholesale exchange rate that our investor wishes to obtain. In every case, the investor would be purchasing canadian stocks that he wishes to own for their own merits. The only wrinkle is that he's buying them on new york.

when these purchases settle, the investor would have the stocks journalled to his canadian account. He would then, from time to time, sell some of these stocks as needed, for proceeds in canadian dollars. The foregoing is not a perfect gambit, and there is a market trading risk. However, seen from the perspective that the investor made a valid investment decision to buy XYZ in the first place, he is bearing that market risk at all times anyhow.

more exotic solutions include shorting an interlisted canadian stock in the desired currency, ie on toronto, while using USD to buy US calls in the same stock to cover the short position.

another and very different choice that a person who is frequently exchanging significant amounts at regular intervals might consider is an account at Interactive brokers, which offers forex trading where USD/CAD pairs can be traded for tiny commissions.
 

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Xetrade is likely cheaper, at least it was a few years back.

If doing a gambit, sell the stock short first, then buy the stock second (same day, same minute actually). Just run it by your brokerage first to make sure it'll work.
 

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My understanding is that Norbert's Gambit only works seamlessly in TDW registered accounts, because there aren't separate USD and CAD accounts. From what I've heard(I've never tried it myself), Norbert's Gambit is just as much a pain in TDW non-registered accounts because of the journalling.

However, there is a variant of Norbert's Gambit that should work in any non-registered account with separate CAD and USD subaccounts. You can do a short sale of an interlisted stock on one exchange and immediately buy the stock on the other exchange. On the settlement date, call the broker and ask them to journal the long position to the other account to cover the short. The brokerage has to let you cover the short position, so this should work.

I would call the brokerage ahead of time to confirm that they will let you do this. Just make sure that you don't give any indication that you're trying the gambit. Just ask them, if you have a short position in a stock in one account and you believe that you can buy it back more cheaply on the other exchange, will they let you do the purchase on the other exchange and journal the shares over to cover the short? Make no mention of currency conversions or anything -- pretend that you're actually interested in shorting stock.

In order to short stock you need a margin account, but if you're regularly converting $10K USD I don't think that you'll have much trouble getting it.

Edit:

I really should read the whole thread before replying. This was just a more long-winded way of saying what the previous posters have already said...
 

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it's more difficult than what mikeT says. Unless done in 2 entirely different & separate accounts, both the short & the long positions will run concurrently for 3 days until settlement occurs, and that is precisely what compliance will cancel because it violates the don't-short-the-box rules. This is what the scotia itrade rep was trying to explain to the OP.

in some cases, on a random haphazard basis, these attempts have worked because 1) compliance failed to notice, or 2) a poorly-trained representative journalled a long covering position to a short account before settlement date & compliance failed to notice.

the old cluster of messages about norbert's gambit - from around 2005 - have examples like this, but i'd say those messages are out of date & obsolete because brokerages have wised up. Especially with the calls i hear they're getting these days about gambit strategies.
 

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rysto won't work for the same reason as i set forth a few minutes ago. Your plan will trigger a 3-day period in which both long & short positions will run concurrently in same account. There are rules against this. Every broker will respect them.

such an attempt might slip through the cracks initially but the risk looms that compliance will cancel one side or the other of the gambit with no notice whatsoever ... leaving the client short with no cover ... or long a stock he didn't want with no hedge ...
 

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Your plan will trigger a 3-day period in which both long & short positions will run concurrently in same account. There are rules against this. Every broker will respect them.
There are no rules against this. There are rules about selling short when you already hold a long position. There are no rules against buying while you are in a short position. There can't be rules against it; you have to be able to buy long when you are short in order to be able to cover the short.
 

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Humble pie, sorry, but you are completely wrong.

You are ALWAYS allowed to cover a short position. Same day is fine.. As long as the short position is established first, even by a few seconds.

The rules you're talking about are if you go long first, then short.
 

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" ... There are no rules against buying while you are in a short position. There can't be rules against it; you have to be able to buy long when you are short in order to be able to cover the short. "

yup i'd wondered if some noob would come back with that notion. What i didn't anticipate is that the noob would be so belligerent about it. Let alone a noob who'd brag about lying to his broker lol.

of course one can cover a short at any time, even one second after putting on the short position. Covering a short means buying stock to cover in the short account which by definition means buying with the same currency. This is not what a gambit strategy seeks to accomplish. It seeks to cross the gulf into the opposite currency without FX fees. There are only a couple of frail, frayed rope bridges across that chasm & our friend has not got hold of either one.

cross-holding concurrent long & short positions in different currency satellites of the same account does indeed violate the rules & will indeed attract compliance. Read the rules. Ask your broker. Assuming they're willing to speak to you, after the conspicuously dishonest conduct towards brokers that you've advocated upthread.

as i've posted elsewhere, an online trading platform built on the ADP mainframe system (bmo, possibly roybank) is more amenable to gambitting than one built upon the ISM system (tdw.) And sometimes it happens that trading representatives and compliance departments are far less vigilant than they should be.

addendum to Mike the T: i hadn't realized that you are also a noob, at least with respect to shorting ...
 

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Are you saying its illegal? Or it will just attract some attention?

Can you post the law? Or a link to it? Because I can't seem to find it.

The shorting against the box laws just create a taxable event, which wouldn't matter if you didn't have any appreciation of the stock price. They also have a law prohibiting you from using the off-setting positions as margin .. which wouldn't matter either for the purposes of a gambit. So I don't know which law you're referring to.
 

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Discussion Starter #13
Xetrade is likely cheaper, at least it was a few years back.
Thanks for your replies all! Ok, so first in regards to the FX companies, I thought XETrade *was* cheaper which was why I went through the trouble of setting one of those accounts up a year ago. However, I"ve only used them like once because their rate still includes at least a 1.5% fee.

For that amount of money, Interactive Brokers is probably the best bet. They charge 0.2% for that amount of money.
I'm rather intrigued about Interactive Brokers? So for example, if the USD == CAD (as according to this) and I want to move 10K from USD to CAD, my total bill for the transaction would be $10,020 USD? I want to be sure that that is the consistent rate that it charges and that it actually uses the ACTUAL rate not a rate that includes their spread like XETrade.
 

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Now in regards to cross trading in the stock market to eliminate the spread entirely (minus trading fees), I have a few questions.

Obviously my situation is iTrade specific. I currently only have USD and CAD cash accounts. I may open up a margin account soon to allow shorting if I can figure out what the rules are and what's generally accepted. It doesn't seem like there's much of a consensus here, which is odd.

Here's what I'm thinking:

Those who are advocating to short the box are recommending it soley to "freeze" the price of the stock you will be journaling over. This minimizes any risk due to market fluctuation. This does seem like a pretty good idea. Shorting the box, according to my research does not appear to be illegal and I would think is allowed by brokers, but it won't shelter your capital gains (if applicable). If this is done, it pretty much doesn't matter what interlisted stock gets purchased/sold as the price has no effect. I'm not sure why online brokerages would have any rules against it either since they still make their money on commissions.

So in summary this seems to be the simplest way of getting this thing done pretty much risk-free.

  1. Buy any high-volume interlisted stock on the NYSE.
  2. Seconds later, short the same stock in your margin account.
  3. Wait at least 3 days for the trades to settle.
  4. Phone in to have the shares journaled over.
  5. Wait 1 more business day. (takes that long to have them journaled)
  6. Close the short position.
  7. Seconds later, sell the interlisted stock on the TSE.
Did I miss something?
 

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Couple things,

1. Short the stock on the tsx first.
2. Buy the same number of shares on the NYSE second.
3. Call in and have them journal your bought shares over and have them use them to cover your short.

In your example 2 and 7 are the same thing. You don't need to sell the stock twice. Also shorting first avoids the "shorting the stock you already own" problem (at least I thought it did).

Now humble says this is illegal or against some rules. I've been reading through the laws and can't find mention of anything other than what I've mentioned above. Maybe he can post the rule he's referring to and then we can settle this whole thing.

The other option is to buy some put options to cover your shares for the three days then sell everything after the settlement date. A little more costly, but probably less controversial. Or you could forgo the options and just take the risk for a couple days.

And the last option is just to pay the cheapest conversion fee you can find. Depending on the amount of money, this might be cheaper anyways.
 

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the speed with which mistersolicitor T has read the universe of laws is awesome. In reality no one said anything about lawful, unlawful, legal, illegal except the legal beagle himself.

beagleT, have you ever actually accomplished a real gambit. Or are you just blustering a theoretical approach.

if it's theory only, surely now is the time to try the real thing :)

gambit should be done with 2 online orders. Gambitters need to avoid telephone wait times + haphazard risk of refusal by representatives + higher agent commish.

journalling has to be completed. The catchy part is representatives who may - and do - refuse to journal. For the reasons already reviewed. Please do keep in mind that cross-currency journalling outside a short account is a voluntary service which a broker can offer at their discretion. Or not.

as i've mentioned, some brokers' trading platforms are easier to gambit.

good luck. US markets are open tomorrow. Let us know how you fare.
 

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With my work I get paid in USD every month from multiple sources. I move it through my RBC USD personal account and transfer it to my online brokerage account @ Scotia iTrade.

The amounts I'm dealing with are upwards of $10,000 USD/month.

What I'm asking is the best way to convert the USD to CAD each month to pay bills and such. Also any ideas on what I should do with the money to passiblely earn a little more coin is much appreciated!.


1. Tell your clients you want to paid in real money?;)

2. Buy besteller books in the US with the $US, and sell them on the internet at the CDN price?

3. Find out a way to claim the exchange rate as a business expense?

4. Drive as far south as you can, collect your money in US dollars, then buy CDN dollars at a financial instiution that is selling CDN dollars at a discount
because it is cheaper than shipping it to a commercial currency exchange; then drive home. Of course the RCMP may come knocking on your door about all the cash you are bringing across the border. :rolleyes:
 

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Hey thanks for your out-of-the box post, OhGreatGuru.

1. Tell your clients you want to paid in real money?;)
#1 is not possible unfortunately.

2. Buy besteller books in the US with the $US, and sell them on the internet at the CDN price?
#2 is similar to a similar strategy I will use when setting up my own retail business later this year. I will be purchasing inventory from the US and will therefore get to efficiently use my USD.

3. Find out a way to claim the exchange rate as a business expense?
#3 I already do (after talking with the CRA). It really adds up.

4. Drive as far south as you can, collect your money in US dollars, then buy CDN dollars at a financial instiution that is selling CDN dollars at a discount
because it is cheaper than shipping it to a commercial currency exchange; then drive home. Of course the RCMP may come knocking on your door about all the cash you are bringing across the border. :rolleyes:
#4 I haven't heard of no. 4 before but I personally have no clue as to go about doing that. Also, it really wouldn't be cost effective.
 
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