Norbert's Gambit with BMO Investorline?

TheImp wrote: ↑I executed this trade twice - first on Mar 17, 2015, and the second time on Apr 23, 2015. In the former case, both trades settled on Mar 20, 2015 and BMO recorded these as "transferred out" in their system on Mar 23, 2015. In the latter case, the trades settled on Apr 28, 2015 and transferred out on Apr 29, 2015.

The only difference is in the second case.. I immediately used the proceeds of the gambit to invest in US ETFs (while in the former, I held US cash for a while). Those trades were executed and settled on the same days as the gambit - April 23, 2015 and Apr 28, 2015, respectively.

Looking in my transaction history, I noticed the following:
Interest INT FR 04/22 THRU05/[email protected] % BA -15.42 U

It looks like I was charged interest? Is this valid?!
I plan on calling them about it, but I want to know beforehand what people think about whether this is a valid charge. My understanding of what I've read sounds like it isn't.. since everything settled on the same day.

Cerenity wrote: ↑It happened to me and my parents before. if you call in about it they will happily reverse it for you
The CSR that I spoke to last time indicated it was a glitch in their system.

cessnabmw wrote: ↑How much can one save using the Norbert's gambit?

cessnabmw wrote: ↑How much can one save using the Norbert's gambit?

Marzipan wrote: ↑Does the ETF purchase also take three days to settle ... like the equities you used to do the exchange? If so I can't see that you used their money.

EDIT:
I just looked up the chronology of my BMOIL gambit and it could explain the charge. (No interest is posted for me yet.)
Jun 01 Settled Buy 600 BMO in USA
Jun 04 Settled Sell 600 BMO in CAN
Jun 08 Transfer 600 BMO from US to CA side of account.

So they took their time journaling the stock over. Their computer might be charging interest on the artificial short of 600 shares for 4 days. Check the date of the journal entry.

Marzipan wrote: ↑So BMO IL has taken a mysterious interest charge from my account. I suspect it is related to the Norbert's Gambit where I had no negative balance. It is charged at 4.1% on the Canadian side. Check your charges if you have done this gambit.

EDIT:
BMO seem to consider the funds from the sale to be in your account the day they journal the shares over rather than the settlement date.

In the example of my own gambit as quoted above, the funds should have been in my account Jun 04 ... and the statement shows that, but the interest charged seems to be based on BMO financing me until Jun 08 when they got around to journalling the shares over.

mr_raider wrote: ↑RBc does that too sometimes. Usually if you call in and speak to them, you can get it reversed. As much as people bitch about big banks, RBC DI has excellent customer service.

Marzipan wrote: ↑I got a response from BMOIL on the interest charged and, in my case, the explanation is this ... something I never knew.

Settlement was Friday June 5 and that is the date shown when I got the money. But, according to the interest calculation, the funds did not reduce my negative balance until the weekend was over.

I would have thought that if you put money into your account on a Friday, it would be there for your benefit on Saturday! No?

Gingercookie wrote: ↑So what they are saying is your positive cash position is unable to offset the negative balance from the short position? Did you buy something with the cash immediately after the trade?

Marzipan wrote: ↑The sale was settled on the Friday but those funds were not available to offset the debit position until Monday. With Sat and Sun being non-business days, perhaps, all of Friday's transactions are effective at the end of Sunday.

If that is true then it should work in reverse. If you go to a deficit position on a Friday they should not start charging interest until the Monday.

Gingercookie wrote: ↑It makes no sense. Let's remove the Norbert element and only look at your short BMO in the CAD side. If the short sale was settled on Friday then both sides will settle together, i.e: your account gets credit for proceeds from the short sale creating a positive balance, and the shares go short at the same time creating a negative balance. The two positions will net out each other to zero, unless you bought some CAD shares with the short proceeds before Friday's settlement, creating a shortfall going into the weekend. I haven't shorted in a while but I remember as long as I have enough money in the account to cover the value of the short shares I wasn't charged interest.

I have reviewed your account and the following dates showed your account was in a debit:

Opening balance
June 3 $-4481.37
June 4 $-13481.37
June 5 / 7 $-21481.37
June 8 $24282.68

Based on the average balance of $17106.68, you were in a debit for 6 days and interest was charged at the rate 4.1%.

Marzipan wrote: ↑Thanks for the comment. If anyone is interested in calculating interest here are the figures.

The issue is that 45,764.05 was credited to my account on Friday Jun 5 ... but BMOIL continued to charge interest as if it was not in there for a couple more days. They seem to base their interest calculation on opening balance for the following day. Thus, my big deposit would wipe out the debit balance for Saturday. But because that is not a business day it was Monday when the interest stopped being charged.

That is probably the way it works and good to know. However, when I asked BMOIL to account for the interest charged of $11.53 this is the reply I got.




It looks like a fudged response because I see only 5 days in debit and do not agree with their average balance.