Securities Exchange Commishion fee queston.

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J G Bankerton
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Securities Exchange Commishion fee queston.

Post by J G Bankerton » Fri Jan 04, 2019 11:01 am

I was charged a SEC fee by Vanguard the last two times I sold securities. This never happened before. Has something changed?
https://www.investopedia.com/terms/s/secfee.asp

tenkuky
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Re: Securities Exchange Commishion fee queston.

Post by tenkuky » Fri Jan 04, 2019 2:46 pm

J G Bankerton wrote:
Fri Jan 04, 2019 11:01 am
I was charged a SEC fee by Vanguard the last two times I sold securities. This never happened before. Has something changed?
https://www.investopedia.com/terms/s/secfee.asp
I have had this with Schwab for several years now. It is usually a small amount directly related to the number of shares sold of the ETF I've held (never with mutual funds). I didn't do the exact percent calculation. They call it "exchange process fee" and is only for sales, not purchases.

From Schwab website:
The Securities and Exchange Commission (SEC) assesses transaction fees on national securities exchanges and self-regulatory organizations based on the aggregate dollar amount of sales of certain securities. The SEC recalculates the amount of this fee periodically—at least once per year but sometimes more often. National securities exchanges and self-regulatory organizations offset the transaction fees by charging their member broker-dealers such as Schwab, and we, in turn, offset this fee by charging you an Exchange Process Fee for covered sell transactions. U.S. option exchanges charge Schwab and other broker-dealers per-contract fees for purchases and sales of exchange-listed options. The exchanges may charge these fees even on transactions executed on other exchanges, which can result in multiple fees being imposed on Schwab for a single transaction. Schwab offsets these fees by charging you a single Exchange Process Fee for each covered transaction. Any Exchange Process Fee that appears on your trade confirmation for a sale of an exchange-listed option will combine the offsets for the fees charged both by the U.S. option exchanges and by the national securities and self-regulatory organizations.
Last edited by tenkuky on Fri Jan 04, 2019 3:04 pm, edited 1 time in total.

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jhfenton
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Re: Securities Exchange Commishion fee queston.

Post by jhfenton » Fri Jan 04, 2019 2:52 pm

J G Bankerton wrote:
Fri Jan 04, 2019 11:01 am
I was charged a SEC fee by Vanguard the last two times I sold securities. This never happened before. Has something changed?
https://www.investopedia.com/terms/s/secfee.asp
If you've ever sold a stock or ETF at Vanguard or any other US broker before, you've paid this fee.

livesoft
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Re: Securities Exchange Commishion fee queston.

Post by livesoft » Fri Jan 04, 2019 3:04 pm

If selling mutual funds, then the fee doesn't appear because the mutual fund pays these fees when the do transactions with the underlying investments.

And when selling low dollar amounts of ETFs and stocks, then the fee could be rounded down to $0.00.
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J G Bankerton
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Re: Securities Exchange Commishion fee queston.

Post by J G Bankerton » Fri Jan 04, 2019 3:16 pm

livesoft wrote:
Fri Jan 04, 2019 3:04 pm
And when selling low dollar amounts of ETFs and stocks, then the fee could be rounded down to $0.00.
That could be it. I have to look but I made some fairly large sales and was not charged an SEC fee. Is the cutoff in the thousands of dollars?

livesoft
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Re: Securities Exchange Commishion fee queston.

Post by livesoft » Fri Jan 04, 2019 3:18 pm

J G Bankerton wrote:
Fri Jan 04, 2019 3:16 pm
livesoft wrote:
Fri Jan 04, 2019 3:04 pm
And when selling low dollar amounts of ETFs and stocks, then the fee could be rounded down to $0.00.
That could be it. I have to look but I made some fairly large sales and was not charged an SEC fee. Is the cutoff in the thousands of dollars?
Homework for you: Given the rate of the fee in the link you provided, what would be the dollar amount of a sale to get a 1 cent fee?
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jhfenton
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Re: Securities Exchange Commishion fee queston.

Post by jhfenton » Fri Jan 04, 2019 3:30 pm

J G Bankerton wrote:
Fri Jan 04, 2019 3:16 pm
livesoft wrote:
Fri Jan 04, 2019 3:04 pm
And when selling low dollar amounts of ETFs and stocks, then the fee could be rounded down to $0.00.
That could be it. I have to look but I made some fairly large sales and was not charged an SEC fee. Is the cutoff in the thousands of dollars?
No. If you sold thousands (or hundreds) of dollars of stocks you paid the SEC fee. You just didn't notice it. It's in Section 31 of the Securities Exchange Act of 1934.

I looked at my smallest ETF transactions in the last few years. One time I sold 1 share of VBR at ~$134 and paid no fee. Another time I sold 2 shares of VSS for ~$243 and paid $0.01.

The SEC changes the fee regularly to balance trading volumes and SEC expenses.

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J G Bankerton
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Re: Securities Exchange Commishion fee queston.

Post by J G Bankerton » Fri Jan 04, 2019 7:38 pm

Upon further review; debt instruments, such as bonds, are not charged this fee and brokerages might also choose special instances where they will not pass the SEC fee on to their customers..

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J G Bankerton
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Re: Securities Exchange Commishion fee queston.

Post by J G Bankerton » Fri Jan 11, 2019 10:41 am

I notice when I sell VGSLX there is no fee and when I sell VNQ there is a fee. They are the same fund, REIT, just a different class of shares. The ETF flavor has the fee wile the mutual fund does not. Does Vanguard eat the fee or is the fee only charged for ETF sales? :confused

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Re: Securities Exchange Commishion fee queston.

Post by jhfenton » Fri Jan 11, 2019 11:04 am

J G Bankerton wrote:
Fri Jan 04, 2019 7:38 pm
Upon further review; debt instruments, such as bonds, are not charged this fee and brokerages might also choose special instances where they will not pass the SEC fee on to their customers..
J G Bankerton wrote:
Fri Jan 11, 2019 10:41 am
I notice when I sell VGSLX there is no fee and when I sell VNQ there is a fee. They are the same fund, REIT, just a different class of shares. The ETF flavor has the fee wile the mutual fund does not. Does Vanguard eat the fee or is the fee only charged for ETF sales? :confused
It is only charged on the sale of exchange-traded securities. You won't see it on the sale of bonds or mutual funds.

You can find some more information here, including the latest fee notices. Over the last several years, they've changed the fee 2-4 times per year.

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J G Bankerton
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Re: Securities Exchange Commishion fee queston.

Post by J G Bankerton » Fri Jan 11, 2019 1:53 pm

jhfenton wrote:
Fri Jan 11, 2019 11:04 am
It is only charged on the sale of exchange-traded securities.
That is good to know. That is another reason to be an investor and not a trader.

alex_686
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Re: Securities Exchange Commishion fee queston.

Post by alex_686 » Fri Jan 11, 2019 1:56 pm

J G Bankerton wrote:
Fri Jan 11, 2019 1:53 pm
jhfenton wrote:
Fri Jan 11, 2019 11:04 am
It is only charged on the sale of exchange-traded securities.
That is good to know. That is another reason to be an investor and not a trader.
I will point out that as a mutual fund investor, you still pay this fee - just indirectly. The mutual fund needs to run its own trading desk, they have to trade, they get charged a fee. You just don't see it. So not much of a difference.

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J G Bankerton
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Re: Securities Exchange Commishion fee queston.

Post by J G Bankerton » Fri Jan 11, 2019 2:04 pm

alex_686 wrote:
Fri Jan 11, 2019 1:56 pm
J G Bankerton wrote:
Fri Jan 11, 2019 1:53 pm
jhfenton wrote:
Fri Jan 11, 2019 11:04 am
It is only charged on the sale of exchange-traded securities.
That is good to know. That is another reason to be an investor and not a trader.
I will point out that as a mutual fund investor, you still pay this fee - just indirectly. The mutual fund needs to run its own trading desk, they have to trade, they get charged a fee. You just don't see it. So not much of a difference.
How much trading does Vanguard do internally without having to sell securities. With four trillion under management they should be able to do some.

This does answer my question of why the fee appears when it does. I never noticed it until I move all my US stock holdings from VTI to VOO to tax loss harvest. If I itemized deduction's are the fees deductible?

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Re: Securities Exchange Commishion fee queston.

Post by jhfenton » Fri Jan 11, 2019 2:35 pm

J G Bankerton wrote:
Fri Jan 11, 2019 2:04 pm
This does answer my question of why the fee appears when it does. I never noticed it until I move all my US stock holdings from VTI to VOO to tax loss harvest. If I itemized deduction's are the fees deductible?
They are not itemized deductions per se, but they reduce the amount you receive on the sale, so they either increase your deductible loss or decrease your realized gain ever so slightly. Vanguard factors them into the numbers on the 1099-B.

alex_686
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Re: Securities Exchange Commishion fee queston.

Post by alex_686 » Fri Jan 11, 2019 2:46 pm

J G Bankerton wrote:
Fri Jan 11, 2019 2:04 pm
How much trading does Vanguard do internally without having to sell securities. With four trillion under management they should be able to do some.
Not as much as you think. First, you would need funds with cross flows of trades. Second, the SEC frowns on internal cross trades. There have been a fair number of scandals in the past where a broker has favored one client over the other. It can, and it is done, but there are a extra set of hurdles one needs to cross.

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J G Bankerton
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Re: Securities Exchange Commishion fee queston.

Post by J G Bankerton » Fri Jan 11, 2019 2:52 pm

alex_686 wrote:
Fri Jan 11, 2019 2:46 pm
J G Bankerton wrote:
Fri Jan 11, 2019 2:04 pm
How much trading does Vanguard do internally without having to sell securities. With four trillion under management they should be able to do some.
Not as much as you think.
Vanguard would only have to swap stock in the mutual funds and they would have all night to do it. It doesn't make sense to buy and sell ten million shares of stock when the funds share count only changes by a few hundred thousand.

alex_686
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Re: Securities Exchange Commishion fee queston.

Post by alex_686 » Fri Jan 11, 2019 2:55 pm

J G Bankerton wrote:
Fri Jan 11, 2019 2:52 pm
Vanguard would only have to swap stock in the mutual funds and they would have all night to do it. It doesn't make sense to buy and sell ten million shares of stock when the funds share count only changes by a few hundred thousand.
I have done this for a living, and that is now how it works. I understand the impulse but the complexities or the real work intervene.

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