What is Norbert’s Gambit?
Norbert Schlenker, the president of Libra Investment Management, reportedly came up with the idea for Norbert’s Gambit nearly 40 years ago. The concept became more prevalent over the past 20 years.
Schlenker used his idea to convert currency between Canadian and U.S. dollars using inter-listed stocks. For example, some Canadian stocks listed on the Toronto Stock Exchange (TSX) are also listed in U.S. dollars on the New York Stock Exchange (NYSE). This inter-listing can allow an investor to buy in one currency and sell in the other currency, effectively converting dollars for only the cost of trading commissions.
An example of Norbert’s Gambit with RBC shares
On Feb. 14, 2025, Royal Bank of Canada (RBC) shares closed at $168.67 per share on the TSX. On the NYSE, they closed at $119.04. The price difference represents the foreign exchange rate between the two currencies. The Canadian-dollar shares were trading at about a 1.417 premium to the U.S.-dollar shares because the U.S. dollar closed at 1.418 Canadian dollars on Feb. 14, 2025.
As the currencies move, the shares on the two exchanges should be worth almost the same, after accounting for the foreign exchange rate at the time.
An investor may be able to purchase Royal Bank shares in Canadian dollars on the TSX and then “journal” the dual-listed shares to NYSE-listed Royal Bank shares, selling them in U.S. dollars. “Journaling” refers to transferring equivalent shares from one exchange to another.
A better solution: DLR ETF units
One problem with buying inter-listed common shares is that the shares can fluctuate in value.
Norbert’s Gambit can also be implemented using an exchange-traded fund (ETF) like the Global X US Dollar Currency ETF, which trades in Canadian and U.S. dollars on the TSX. The ticker symbol is DLR (Canadian dollar) or DLR.U (U.S. dollar).
The DLR/DLR.U ETF tracks the value of the U.S. dollar in either U.S. dollars or Canadian dollars, so the investor may be less exposed to changes in an underlying stock price that can be volatile.
