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About time,, when did computers come on the scene... 1970-80? Only took 40 years to get to T+1
No kidding. Progress, right? While T+3 was needed when things were paper-based, I suspect it's probably stuck around so long b/c brokerages liked having T+3 and T+2 days to collect interest on unsettled funds? I guess the SEC finally said, "no, this is bad for investors."
Remember, T+3 changed to T+2 only in 2017 (not that long ago). And before T+3 was T+5. Anyway, we should welcome T+1 on 5/28/24. This change was announced a couple of years ago, but firms were given a window of time to get ready for it. https://www.finra.org/investors/insights/understanding-settlement-cycles
This should eliminate the confusion that is possible now with T+1 for mutual funds/OEFs, but T+2 for others.
Most but not all OEFs trade T+1. Some still trade T+2. I ran into this problem a couple of months ago at Fidelity.
Fidelity will let you do a same day, cross-family exchange if you place the order over the phone and if you limit the amount to 90% (in dollars) of the old fund's value. Except, it won't let you do this if the old fund settles T+2 and the new fund settles T+1. I think it was Hartford funds that settled T+2.
Then there are MMFs that settle on the same day (T+0). I've run into that at Merrill Edge. If you're a Merrill customer (with login) you can see settlement days and trade cutoff times here: https://olui2.fs.ml.com/Mutualfunds/MFBDCashManagement.aspx
@msf, thanks for the additional info. The details vary by brokerages.
Fido will do same day exchange for Fido mutual funds, but does this 2-day exchange when one or both funds involved are non-Fido mutual funds. So, day 1 to sell, day 2 to buy. Schwab is similar.
From margin accounts, simultaneous buy and sell mutual fund orders can be placed without any issue and both settle as T+1, but that doesn't work for cash/non-margin accounts or IRAs. 90% trick to buy can also work if there is an order to sell. Interestingly, Vanguard just issues a warning in non-margin accounts that cash is due but accepts simultaneous trades.
I have gotten burned a few times on OEF and ETF orders because the cash available shown on Position screens may be misleading. Now, simultaneous sell-OEF and buy-ETF is fine, but sell-ETF and buy-OEF isn't (due to mismatch in settlements).
T+0 for money-markets do exist, but not at Schwab. As Fido treats is m-mkt funds as sort of interconnected, and a Fido m-mkt fund is core/settlement, this issue doesn't arise.
Is there not an extra charge for over the phone transactions?
I've never been charged. Maybe they just like me Realistically, it's because a same day, cross-family transaction is something that cannot be done online and Fidelity doesn't penalize you for doing something the only way possible. Even if that's by phone.
Just curious, is it T+0 even for non- Merrill MMs?
Regarding Merrill MMs, are you talking about Merrill MMAs? There are no Merrill MMFs under Merrill's Cash Management Solutions. I believe you have an account at Merrill. Take a look.
Comments
Anyway, we should welcome T+1 on 5/28/24. This change was announced a couple of years ago, but firms were given a window of time to get ready for it.
https://www.finra.org/investors/insights/understanding-settlement-cycles
Most but not all OEFs trade T+1. Some still trade T+2. I ran into this problem a couple of months ago at Fidelity.
Fidelity will let you do a same day, cross-family exchange if you place the order over the phone and if you limit the amount to 90% (in dollars) of the old fund's value. Except, it won't let you do this if the old fund settles T+2 and the new fund settles T+1. I think it was Hartford funds that settled T+2.
Then there are MMFs that settle on the same day (T+0). I've run into that at Merrill Edge. If you're a Merrill customer (with login) you can see settlement days and trade cutoff times here:
https://olui2.fs.ml.com/Mutualfunds/MFBDCashManagement.aspx
Fido will do same day exchange for Fido mutual funds, but does this 2-day exchange when one or both funds involved are non-Fido mutual funds. So, day 1 to sell, day 2 to buy. Schwab is similar.
From margin accounts, simultaneous buy and sell mutual fund orders can be placed without any issue and both settle as T+1, but that doesn't work for cash/non-margin accounts or IRAs. 90% trick to buy can also work if there is an order to sell. Interestingly, Vanguard just issues a warning in non-margin accounts that cash is due but accepts simultaneous trades.
I have gotten burned a few times on OEF and ETF orders because the cash available shown on Position screens may be misleading. Now, simultaneous sell-OEF and buy-ETF is fine, but sell-ETF and buy-OEF isn't (due to mismatch in settlements).
T+0 for money-markets do exist, but not at Schwab. As Fido treats is m-mkt funds as sort of interconnected, and a Fido m-mkt fund is core/settlement, this issue doesn't arise.
Is there not an extra charge for over the phone transactions?
Realistically, it's because a same day, cross-family transaction is something that cannot be done online and Fidelity doesn't penalize you for doing something the only way possible. Even if that's by phone. Regarding Merrill MMs, are you talking about Merrill MMAs? There are no Merrill MMFs under Merrill's Cash Management Solutions. I believe you have an account at Merrill. Take a look.
https://olui2.fs.ml.com/Mutualfunds/MFBDCashManagement.aspx