Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
While it is true that prime m-mkt funds haven't had to impose gates/redemption fees, the latest m-mkt reforms are driven by the fact that 2014/2016 m-mkt rules (that had gates/redemption fees for prime m-mkt) decimated prime m-mkt funds in 2020 and other later times by huge outflows just from the fears of possible gates/redemption fees. This was so bad that it destabilized the commercial paper market. I haven't kept track of these latest m-mkt reforms but I recall that the idea was to do away gates/redemption fees in the favor of floating NAVs for all prime funds (thus eliminating distinctions between retail and institutional prime).
IMO, the small incremental yields offered by prime m-mkt funds aren't worth the associated headaches. This is especially so if check-writing is involved and some checks can remain outstanding for weeks, if not months.
I know the rules about liquidity fees and redemption gates.
So, what was that all about pointing out FZDXX is subject to redemption gates, without mentioning that SWVXX is also subject to the same redemption gates?
The incremental yield between SPAXX and FZDXX is about 40 basis points (0.99% vs 1.40% SEC yield as of June 30th). And as @BaluBalu noted, you don't have to move money out of FZDXX to write a check. So you get that extra 40 basis points for weeks, if not months. At least assuming that the gates are not triggered.
(They have not yet been repealed; the SEC has yet to issue its Final Rule. I checked before making my prior post.)
Swing pricing is proposed only for institutional prime funds. Rather than eliminating the distinction between institutional and retail funds, this would amplify it. And it is this part of the proposal that has drawn the most negative feedback.
Due to differences in observed investor behavior and liquidity costs during a crisis among the various fund types, swing pricing would not apply to government money market funds or retail money market funds.
So, what was that all about pointing out FZDXX is subject to redemption gates, without mentioning that SWVXX is also subject to the same redemption gates?
Schwab doesn't treat SWVXX as a checking account. So at Schwab you can't pull money out (say, at an ATM) moments before the fund is frozen. You can pull money from FZDXX only to have the fund frozen before the shares are sold at end of day.
Fidelity introduced that problem and doesn't know how it would handle it.
I expect financial institutions to be able to tell me exactly what will happen with my money when I do X. Fidelity can't. To their credit, they acknowledged this.
I have never done a wire into or out of Schwab before. This is the first time I took money out of Schwab. My household balance at Schwab has been way more than the $100K requirement posted at the link - I am happy to share with @Yogibearbull if anybody doubts. Life is too short for me to go back and dispute with Schwab about their advice. As I said, I do not pay wire fees at other brokerages. I mentioned to Fidelity about my interaction with Schwab regarding the wire, and Fidelity claimed they do not charge for any outgoing wire for any client. There was no reason for me to check their fees schedule. Please check if it is relevant for you.
So, what was that all about pointing out FZDXX is subject to redemption gates, without mentioning that SWVXX is also subject to the same redemption gates?
Schwab doesn't treat SWVXX as a checking account. So at Schwab you can't pull money out (say, at an ATM) moments before the fund is frozen. You can pull money from FZDXX only to have the fund frozen before the shares are sold at end of day.
Fidelity introduced that problem and doesn't know how it would handle it.
I expect financial institutions to be able to tell me exactly what will happen with my money when I do X. Fidelity can't. To their credit, they acknowledged this.
For me, there is no disadvantage of FZDXX over SWVXX if and when redemption gates are triggered. I am not even considering Fidelity's cleaner history w/r/t MMF redemptions. SWVXX requires me to wait a day to invest funds in it, even when redemption gates are not triggered, which is a big disadvantage for what I want to accomplish. Do not worry about me. I am good.
Just as we were discussing I remembered that I had some money in the Fidelity sweep account and I went ahead and moved the money to FZDXX. Thanks.
Comments
IMO, the small incremental yields offered by prime m-mkt funds aren't worth the associated headaches. This is especially so if check-writing is involved and some checks can remain outstanding for weeks, if not months.
So, what was that all about pointing out FZDXX is subject to redemption gates, without mentioning that SWVXX is also subject to the same redemption gates?
(They have not yet been repealed; the SEC has yet to issue its Final Rule. I checked before making my prior post.)
Swing pricing is proposed only for institutional prime funds. Rather than eliminating the distinction between institutional and retail funds, this would amplify it. And it is this part of the proposal that has drawn the most negative feedback. https://www.sidley.com/en/insights/newsupdates/2022/01/sec-proposes-new-rule-amendments-for-money-market-funds
Fidelity introduced that problem and doesn't know how it would handle it.
I expect financial institutions to be able to tell me exactly what will happen with my money when I do X. Fidelity can't. To their credit, they acknowledged this.
Some brokerages may waive the fee if your account is large enough. Schwab waives its fee for the first three wires per quarter if you have $100K with them.
https://www.schwab.com/legal/schwab-pricing-guide-for-individual-investors"
I have never done a wire into or out of Schwab before. This is the first time I took money out of Schwab. My household balance at Schwab has been way more than the $100K requirement posted at the link - I am happy to share with @Yogibearbull if anybody doubts. Life is too short for me to go back and dispute with Schwab about their advice. As I said, I do not pay wire fees at other brokerages. I mentioned to Fidelity about my interaction with Schwab regarding the wire, and Fidelity claimed they do not charge for any outgoing wire for any client. There was no reason for me to check their fees schedule. Please check if it is relevant for you.
Just as we were discussing I remembered that I had some money in the Fidelity sweep account and I went ahead and moved the money to FZDXX. Thanks.