Discount Brokers

BMO InvestorLine to allow U.S. Dollar Registered Accounts

August 21, 2011


BMO InvestorLine (read review here) will soon allow clients to segregate their Canadian and US Dollar holdings in registered accounts including RRSPs and TFSAs. The ability to hold US dollars will not, however, be available to RESP accounts. According to client service representatives I spoke with recently, BMO InvestorLine will be rolling out the new feature in the second week of September 2011. Competing discount brokers that offer US Dollar registered accounts are RBC Direct Investing, QTrade and Questrade.

It appears that the BMO InvestorLine registered accounts will work just like RBC Direct Investing’s Dual Currency accounts work today. The US dollar side of the registered account will be available to new and existing clients automatically. However, existing clients will have to phone the broker to transfer current holdings they wish to hold in the US dollar side. BMO InvestorLine will not charge an extra admin fee or extra trading commissions for US Dollar registered accounts.

The ability to keep CAD and USD holdings separately is good news for BMO InvestorLine clients. They can completely avoid forced currency conversion when buying and selling US Dollar securities in registered accounts. By converting currency with the Norbert Gambit they can save on steep conversion charges. And best of all, US dollar dividends will not be converted into CAD for holdings in the USD side of registered accounts.

Instant Norbert Gambit for All TD Waterhouse Investment Accounts

July 27, 2011


The Norbert Gambit is an excellent method for converting currency cheaply at discount brokers but some clients of TD Waterhouse have found gambitting with stocks in an investment account involves delays. A friend of mine purchased RIM on the TSX and hoped to sell RIMM on NASDAQ only to be told be TDW that he has to wait for the initial buy to settle (3 days) and a further 2 days before the journaled shares showed up in the US Dollar side of the account. My friend turned out to be lucky – RIM gained 10 percent during the wait but seeing how often RIM trades down these days, the story could have turned out differently. Now, thanks to the efforts of a Canadian Money Forum member who wishes to remain anonymous, all TD Waterhouse clients can implement instant gambits in their investment accounts. The member was also kind enough to put together the following post on how TD Waterhouse clients can make gambitting work for them.

TD Waterhouse representatives say they are ready now to execute the sell sides of instant stock gambitting pairs for all clients with every size of non-registered account [Note: Gambits can be done in TD Waterhouse RRSP accounts without the assistance of a representative].

Gambit trades are more complicated for a TDW licensed representative to handle than other kinds of trades. It’s helpful, therefore, for a client to understand the steps that are involved, not only from the client’s side of things but also from the broker’s.

Here are some hints:

  • TD Waterhouse clients should expect to pay the full agent-handled commission for the gambit sell side. [Note: Trades placed over the phone are charged a minimum commission of $43. If you’d rather wait for the trades to settle and pay WebBroker commissions, you can still gambit with DLR/DLR.U.]
  • Gambitting clients should prepare but not send the opening buy order, which will be an online order.
  • Next, contact a licensed representative by phone & make sure he or she understands what you want to do. Because more general representatives than before are now handling gambit trades, some representatives are fairly new at this practice, so a gambit client should be prepared to wait patiently if a rep needs to check with his team manager.
  • Client should send the buy order only when the agent confirms that he’s ready to do the sell order in the opposite currency.
  • As soon as the buy is filled, the agent will enter the sell order out of the opposite currency account. Initially, his system will block this order, just as investor’s online TDW trading platform will block it. However, the representative will be able to override this block and force the order.
  • At the same time, the representative will be sending a special manual journal request to the credit department alerting them that this trade, unusual though it may look, is nevertheless bona fide because the stock has indeed been purchased and is awaiting journal.
  • Notice that *NO* trades are ever placed through a short account. The gambit sell is executed upon a margin or cash account, not a short account. The result will be a virtual “short,” but it is not a real short in the technical sense of the industry. It does not get entered into the broker’s short records.
  • If there is sufficient margin in the margin account where the stock has been sold, investor may carry on to immediately purchase other securities. However, if gambit stock has been sold out of a cash account, the proceeds may not be used or withdrawn until the journalling of the stock has been accomplished, which will not be until 3-5 days later.
  • My own approach has always been to prepare everything & then contact a licensed representative. If i observe that trouble might develop for one reason or another, then i am always prepared to cheerfully abort the attempt. This is the reason for having the buy order ready but not sending it in until the agent is lined up. A gambit halted early like this is harmless, because no positions have been initiated. Investor should try later on the same day or else on the next day, with a different agent.

It’s important to keep in mind that, for the first time, TD Waterhouse is offering gambit sell trades to all customers on a goodwill basis. Retaining that goodwill is important. As easily and quickly as it has opened the sluice gates, the big green could close down all gambitting permanently, if it finds that staff are having to spend too much time dealing with individual clients.

TD Waterhouse Disallows RRSP Swap Transactions

July 12, 2011


It turns out some discount brokers are indeed discontinuing all swap transactions in RRSP accounts even though Budget 2011 proposed penalizing only those swaps that result in an “advantage”. As Preet Banerjee explained in this column in Globe & Mail, a RRSP swap transaction is one where an asset inside a RRSP (say a Canadian stock) is exchanged for an asset that is of more or less equal value held in another account (say a GIC held in a taxable account).

Unfortunately, TD Waterhouse has informed clients that as of July 1, 2011, it will be disallowing all asset exchanges with RRSP accounts, whether legitimate or not. It is a bit puzzling why TD Waterhouse chose to impose a draconian interpretation of the clampdown on RRSP swaps proposed in the Federal Budget. After all, the Budget is not prohibiting swaps entirely. The Budget is merely proposing to penalize those swaps that are intended to “unduly exploit the tax attributes of an RRSP” and slap a 100% tax on the advantage. TD Waterhouse and other brokerages could take the view that clients who are doing a swap will be doing so at their own risk. After all, that’s how every other transaction made through a discount broker is treated. If a client overcontributes to a RRSP and incurs a penalty, it is the client’s fault, not the discount broker’s. Why should RRSP swaps be any different?

Here’s the announcement from TD Waterhouse:

According to proposed legislation contained in the 2011 Federal Budget announcement, asset exchanges such as “swaps” to registered plans have been discontinued, effective July 1, 2011. As a result, TD Waterhouse has discontinued swap transactions. A “swap” is a transaction in which cash or securities are exchanged between either a registered and a non-registered account, or two registered accounts belonging to the same taxpayer.

Please note that you can continue to make in-kind contributions to your RRSP and swap assets between RRSPs held by you.