Vanguard - No More SpecID for Limit Orders

[Mrs.Daisy]

I just received this email from Vanguard. I always use SpecID to select the shares of the ETFs I want to sell and then use limit orders (especially during volatile times) to avoid being stuck with a bad market order price. Anyone have ideas for what the best course of action would be now?

Email reads in part:

"Effective January 2025, we're updating our method options for non-market orders (limit orders, stop orders, stop-limit orders). When submitting a non-market order, you'll need to elect a non-SpecID method. This change is part of our ongoing efforts to enhance the client experience, better align with industry standards, and streamline the trading process.
.....

When placing a non-market order, you'll choose a cost basis method from the following options:

FIFO (first in, first out).
MinTax (minimum tax).
HIFO (highest in, first out)"

[123]

Usually for these kinds of brokerage limitations there's a two-step workaround.

You could open another Vanguard account (your selling account), move the lots you want to sell in it, and sell from that account with a limit order.

For some investors that squeeze would not be worth the juice.

[Hyperchicken]

This change is part of our ongoing efforts to enhance the client experience, better align with industry standards, and streamline the trading process.

Vanguard

[CenTexan]

I just received this email from Vanguard. I always use SpecID to select the shares of the ETFs I want to sell and then use limit orders (especially during volatile times) to avoid being stuck with a bad market order price. Anyone have ideas for what the best course of action would be now?

Email reads in part:

"Effective January 2025, we're updating our method options for non-market orders (limit orders, stop orders, stop-limit orders). When submitting a non-market order, you'll need to elect a non-SpecID method. This change is part of our ongoing efforts to enhance the client experience, better align with industry standards, and streamline the trading process.
.....

When placing a non-market order, you'll choose a cost basis method from the following options:

FIFO (first in, first out).
MinTax (minimum tax).
HIFO (highest in, first out)"

You're kidding me? Is this for real? What is the logic?

(following topic)

[stan1]

This change is part of our ongoing efforts to enhance the client experience, better align with industry standards, and streamline the trading process.

Vanguard :oops:

We are in the new era of efficiency and tech automation. Please enjoy the experience, it really is for the best.
/sarcasm added in case its not obvious

[Mrs.Daisy]

You could open another Vanguard account (your selling account), move the lots you want to sell in it, and sell from that account with a limit order.

Thank you for this idea. I've never done this and am unsure if Vanguard allows me to choose which lots to move to another brokerage account. But I'll keep it in mind to try in the future. I'd have to open a second brokerage account though uggg

[stan1]

Others will have to post what Schwab and Fidelity offer. I would not take Vanguard's assertion that this is aligning with industry standards at face value of course, but maybe it is. If Schwab and Fidelity still offer it and you do it often, then convert to ETFs and switch brokerages. Vanguard is basically giving you "permission" to do just that with their email.

[Mrs.Daisy]

You're kidding me? Is this for real? What is the logic?

They say:

"Why are we making this change?
Leveraging other methods for non-market trades enhances the ease to execute your trade and ensures you have an accurate inventory of available lots for trades placed during the time your non-market order remains open."

I don't know what they mean by this.

[stan1]

They say:

"Why are we making this change?
Leveraging other methods for non-market trades enhances the ease to execute your trade and ensures you have an accurate inventory of available lots for trades placed during the time your non-market order remains open."

I don't know what they mean by this.

They may be right, especially for small lots and fractional shares. But they are taking a choice away from you.

[Mrs.Daisy]

Others will have to post what Schwab and Fidelity offer. I would not take Vanguard's assertion that this is aligning with industry standards at face value of course, but maybe it is. If Schwab and Fidelity still offer it and you do it often, then convert to ETFs and switch brokerages. Vanguard is basically giving you "permission" to do just that with their email.

Yes, I would be interested to know if Schwab and Fidelity do SpecID for limit orders. My 401k is at Vanguard, so I'm kind of stuck unless I move to having two brokerages.

[Mrs.Daisy]

They may be right, especially for small lots and fractional shares. But they are taking a choice away from you.

From my understanding/experience:

Vanguard doesn't allow selling of fractional shares anyways (unless you liquidate the entire position, in which case the fractional shares are sold separately batched with other people's fractional shares)

And Vanguard only allows dollar amounts to be sold (which would be fractional) with market orders.

So, if only full shares can be sold currently via SpecID, I don't see how they are helping my order execute better by preventing me from using SpecID for my full shares.

[LoveTheBogle]

We are in 2025. Vanguard is in 2010 and going backwards in time. I suspect they will soon introduce $5 stock trades!

This is so crazy pathetic that I would dump Vanguard TODAY and move to another brokerage. Unfortunately, this is likely part of the reason for this change. Vanguard makes its money on expense ratios and you’ll still pay them if you move your Vanguard funds elsewhere.

I would be more annoyed by this if I was a Vanguard brokerage customer by the fact that they aren’t being truthful or they are ignorant. This is not industry standard. This does not make things more efficient. Yet they put it in writing that the opposite is true.

[CenTexan]

They may be right, especially for small lots and fractional shares. But they are taking a choice away from you.

From my understanding/experience:

Vanguard doesn't allow selling of fractional shares anyways (unless you liquidate the entire position, in which case the fractional shares are sold separately batched with other people's fractional shares)

And Vanguard only allows dollar amounts to be sold (which would be fractional) with market orders.

So, if only full shares can be sold currently via SpecID, I don't see how they are helping my order execute better by preventing me from using SpecID for my full shares.

When you made your initial attempt to sell SpecID at Limit, were you selling a $ amount or a share amount?

[Mrs.Daisy]

When you made your initial attempt to sell SpecID at Limit, were you selling a $ amount or a share amount?

I haven't had any issues selling SpecID at Limit previously and I haven't tried since receiving this email. I just received an email that told me they were getting rid of my ability to do it in the future. The email starts with:

"You've been identified as a client who has used SpecID (specific identification) as a cost basis method to select shares for non-market orders. We're writing to inform you of an update to our trading platform."

I have always sold shares using SpecID at Limit. Vanguard doesn't allow dollar amounts to be sold as anything other than market orders.

I only have a single lot in my brokerage account right now, so can't do any testing. The email didn't indicate a date when the rules would be changing.

[Tramper Al]

"We're updating", ". . . our ongoing efforts to enhance the client experience . . ."

They must believe their average "client" is dim-witted. Who do they think they are they kidding with this?

[Tramper Al]

Yes, I would be interested to know if Schwab and Fidelity do SpecID for limit orders.

Of those two, I can only report on Fidelity. And the answer at Fidelity (as at any proper, normal brokerage) is OF COURSE!

What would have been truly offensive is if Vanguard imposed a new account closure fee just a few months before this bone headed move. Oh wait . . .

[WeakOldGuy]

Others will have to post what Schwab and Fidelity offer. I would not take Vanguard's assertion that this is aligning with industry standards at face value of course, but maybe it is. If Schwab and Fidelity still offer it and you do it often, then convert to ETFs and switch brokerages. Vanguard is basically giving you "permission" to do just that with their email.

Yes, I would be interested to know if Schwab and Fidelity do SpecID for limit orders. My 401k is at Vanguard, so I'm kind of stuck unless I move to having two brokerages.

Currently Schwab allows SpecID limit orders. Who knows if it will continue?

Practically, I'm not sure it would make a big difference. Unless you do a lot of trading (not a very Boglehead thing to do) I don't think it would make much difference long term.

[quantAndHold]

Not wanting to be a Vanguard apologist, because this is indeed silly, but their 3 options do cover all of the normal use cases for SpecID.

[Sprucebark]

What’s the difference between HIFO and MINTAX?

[CenTexan]

Practically, I'm not sure it would make a big difference. Unless you do a lot of trading (not a very Boglehead thing to do) I don't think it would make much difference long term.

It does make a difference when I'm doing Capital Loss Harvesting or Capital Gains Harvesting.

[Northern Flicker]

You're kidding me? Is this for real? What is the logic?

They say:

"Why are we making this change?
Leveraging other methods for non-market trades enhances the ease to execute your trade and ensures you have an accurate inventory of available lots for trades placed during the time your non-market order remains open."

I don't know what they mean by this.

My interpretation is that if you have an open limit order for a SpecId and subsequently sell some of that SpecId in another transaction while the limit order is open, then when the limit order executes, the SpecId shares may not be there to sell. Perhaps they had some of these issues with some trades, and don't want to track SpecId's for open limit orders (or are implementing that and the present policy is a stop-gap).

HIFO also is a useful method for specifying tax lots efficiently. I find HIFO is easier to use than SpecId's if I have a fixed dollar amount to realize in the sale. SpecId is easier to use if I am targeting a particular amount of gain to realize or loss to harvest.

[chinchin]

What’s the difference between HIFO and MINTAX?

This is a guess, but the holding period would affect the tax rate paid.

[Northern Flicker]

What’s the difference between HIFO and MINTAX?

This is a guess, but the holding period would affect the tax rate paid.

Perhaps they split MINTAX out from HIFO, which I think at least used to give priority to LTCG's over STCG's.

[WeakOldGuy]

Practically, I'm not sure it would make a big difference. Unless you do a lot of trading (not a very Boglehead thing to do) I don't think it would make much difference long term.

It does make a difference when I'm doing Capital Loss Harvesting or Capital Gains Harvesting.

How big a difference are you seeing between a market order and limit order on highly traded ETFs? I use limit orders most of the time when doing tax loss harvesting, but for those times when I do use a market order I can't say as I've noticed any significant difference on normal volume securities.

[cas]

The email starts with:

"You've been identified as a client who has used SpecID (specific identification) as a cost basis method to select shares for non-market orders. We're writing to inform you of an update to our trading platform."

I've been pondering why there hasn't been a flood of "I got that email, too" responses to your post. (I don't doubt that you got it, but was wondering if possibly the policy change might be less widespread than it might seem at first.)

So ... the above sentence that you quote from Vanguard's email would indicate that not ALL Vanguard clients are getting the email, which would cut down the number of people who would get the email some, but ... still ...

I notice from some of your previous posts that you are located overseas (although as US citizen (I think) who is a US government contractor located overseas). It quickly gets beyond me on how various statuses of "living overseas" affect what can and can not be done with Vanguard, but ... living overseas *is* a difference from most Vanguard clients.

Is there anything in the email that indicates that being overseas might have something to do with you, but apparently not (yet) a huge number of other Vanguard clients, getting the email? Or do you possibly use some non-US version of Vanguard's platform? Or ??

[Mrs.Daisy]

My interpretation is that if you have an open limit order for a SpecId and subsequently sell some of that SpecId in another transaction while the limit order is open, then when the limit order executes, the SpecId shares may not be there to sell. Perhaps they had some of these issues with some trades, and don't want to track SpecId's for open limit orders (or are implementing that and the present policy is a stop-gap).

When I sell with SpecID, a warning always comes up that if you do a second SpecID sale on the same day, the second sale will default to First-In First-Out. So, I feel like they already have an implemented solution to make sure the same lots aren't sold twice.

[Mrs.Daisy]

Not wanting to be a Vanguard apologist, because this is indeed silly, but their 3 options do cover all of the normal use cases for SpecID.

I recently had a situation where none of the other three options would have done what I wanted. I was trying to clean up my tax lots by selling the smallest ones. Some were old with more gains, some newer with less gains than the "average". I used SpecID and it worked well. I guess that may not be a normal use case.

[Mrs.Daisy]

Practically, I'm not sure it would make a big difference. Unless you do a lot of trading (not a very Boglehead thing to do) I don't think it would make much difference long term.

It does make a difference when I'm doing Capital Loss Harvesting or Capital Gains Harvesting.

I agree. I did a lot of tax gains harvesting in 2024 and being able to choose the lots with the amount of gains I want to realize was very important to me.

[Mrs.Daisy]

I've been pondering why there hasn't been a flood of "I got that email, too" responses to your post. (I don't doubt that you got it, but was wondering if possibly the policy change might be less widespread than it might seem at first.)

Is there anything in the email that indicates that being overseas might have something to do with you, but apparently not (yet) a huge number of other Vanguard clients, getting the email? Or do you possibly use some non-US version of Vanguard's platform? Or ??

I'm wondering why no one else has gotten this email also. My spouse also hasn't gotten the email (same home address)

No. Nothing in this email says anything about living overseas. I have a USPS Army Post Office address which is considered inside America, so I am not considered "overseas" by US financial institutions.

I use plain old American Vanguard

[Tramper Al]

When I sell with SpecID, a warning always comes up that if you do a second SpecID sale on the same day, the second sale will default to First-In First-Out. So, I feel like they already have an implemented solution to make sure the same lots aren't sold twice.

You know, though, that taking a 1st order ID'd lot out of consideration when a 2nd order lot ID list comes up - that is just a programming problem. And really, a rather simple one at that. Are the Vanguard tech systems really this limited, that they have to take away very standard trading procedures because they can't work out how to write software, that every else can? And to have marketing come in and sell it to us as a great improvement for our benefit (!), it does not inspire confidence.

When I saw this thread, the first thing I did was check my positions at Vanguard. I only have two left in the taxable account, with multiple lots, and thankfully both have gains that put them well out of consideration for sale in the foreseeable future. But that's not the point, of course.

[WeakOldGuy]

It does make a difference when I'm doing Capital Loss Harvesting or Capital Gains Harvesting.

I agree. I did a lot of tax gains harvesting in 2024 and being able to choose the lots with the amount of gains I want to realize was very important to me.

I'm not questioning the value of SpecId. My question is, practically, how much of a difference does it make in the situation above between doing a Limit sell order vs a Market sell order?

[Mrs.Daisy]

You know, though, that taking a 1st order ID'd lot out of consideration when a 2nd order lot ID list comes up - that is just a programming problem.

I've never noticed if the first set of lots still show up in a second transaction, I just know that the warning comes up that you can't do two SpecID transactions on the same day without the second one defaulting to First-In First Out. The "only one SpecID transaction per day" warning is relatively new (the last few months) if I recall correctly.

[Mrs.Daisy]

I agree. I did a lot of tax gains harvesting in 2024 and being able to choose the lots with the amount of gains I want to realize was very important to me.

I'm not questioning the value of SpecId. My question is, practically, how much of a difference does it make in the situation above between doing a Limit sell order vs a Market sell order?

I'm sure it's subjective, but it matters most to me when I am trying to tax gain harvest during volatile trading periods. Often, in that situation I'm selling a relatively large number of shares and then buying back into the same ETF immediately. I've had a few market orders result in a pretty bad price (maybe 10-20 cents below what it currently lists as fair value). Then, when I buy the shares back, I have to cover that spread. Maybe it's only a $50 difference, but $50 is $50. Plus, with a market order, I don't have as much transparency what the expected tax gain or tax loss is before the sale executes.

[Tramper Al]

You know, though, that taking a 1st order ID'd lot out of consideration when a 2nd order lot ID list comes up - that is just a programming problem.

I've never noticed if the first set of lots still show up in a second transaction, I just know that the warning comes up that you can't do two SpecID transactions on the same day without the second one defaulting to First-In First Out. The "only one SpecID transaction per day" warning is relatively new (the last few months) if I recall correctly.

Yes. All of these brokerages are able to remove a lot from consideration in the holdings list immediately after it is sold, right? This isn't very different. Probably my boggle is primarily that they are touting this as a great step forward when it is the opposite of that.

[FactualFran]

Does the Vanguard Brokerage Service provide an easy way to change what shares are being sold between trade execution and settlement?

[Longdog]

I wonder how they would handle non-covered securities. Since they aren't responsible for the accuracy of the cost basis on those shares, or even the acquisition date, they wouldn't know the tax implications of a sale. For those unaware, even today there are edge cases related to company stock compensation plans (e.g., RSU vesting), which result in non-covered shares being recently acquired.

[Northern Flicker]

It does make a difference when I'm doing Capital Loss Harvesting or Capital Gains Harvesting.

How big a difference are you seeing between a market order and limit order on highly traded ETFs? I use limit orders most of the time when doing tax loss harvesting, but for those times when I do use a market order I can't say as I've noticed any significant difference on normal volume securities.

Market orders are easier to use, and I've always received good execution for market orders from the large, well known fund companies with whose brokerage platforms I've traded ETFs.

If we had another flash crash when I had a market order pending, I would not be a happy camper. The risk seems low, and a strategy would be to use a marketable limit order with the limit set well enough into immediately marketable territory that the trade requests functions like a market order in normal circumstances, but the limit serves as a guard rail to protect against an extreme event.

I guess that strategy may not work at present at Vanguard if choosing tax lots by SpecId.

[Northern Flicker]

Not wanting to be a Vanguard apologist, because this is indeed silly, but their 3 options do cover all of the normal use cases for SpecID.

I recently had a situation where none of the other three options would have done what I wanted. I was trying to clean up my tax lots by selling the smallest ones. Some were old with more gains, some newer with less gains than the "average". I used SpecID and it worked well. I guess that may not be a normal use case.

It's not, but if you want to harvest a loss precisely without the risk of a sale spilling over into unwanted SpecId's due to market movements or trade executions, you need to declare the tax lots by SpecId, so there are salient usages.

[grabiner]

HIFO is usually what you will want to do when using specific ID to sell, but there are some exceptions. For example, if you are selling for a gain, you might prefer a higher long-term gain over a lower short-term gain; conversely, if you use MinTax in this situation, you might prefer the lower short-term gain if you have capital losses to offset it, or if the gain is very small. And if you purchased a lot in the last 30 days and are selling other shares for a loss, you need to sell the shares purchased in the last 30 days to avoid a wash sale.

I trade several low-volume ETFs, so I prefer to use limit orders for my trades. Even when the reported spread is small, it's better to use marketable limit orders, selling at the bid. This protects against a market order getting placed after someone else has accepted the bid, and selling at an unknown and often lower price.

"Why are we making this change?
Leveraging other methods for non-market trades enhances the ease to execute your trade and ensures you have an accurate inventory of available lots for trades placed during the time your non-market order remains open."

The last time I sold an ETF, I received a warning that if I made two sales on the same day and specified the same lot, the second sale would default to FIFO. It may be that some traders are making this mistake.

A common reason for making two sales on the same day is that only part of a limit order is filled, and you have to reprice the order for the remaining shares. Which lot was in which sale could matter if one lot has long-term gains or losses and the other has short-term gains or losses. However, I don't see how you could sell the same lot twice this way unless the brokerage platform supports something it shouldn't; once part of the order has executed, the shares that were in that part should be removed from the available list. (And the brokerage does process this; the cash proceeds from the part of the order that executed are now available for trading.)

[talzara]

Does the Vanguard Brokerage Service provide an easy way to change what shares are being sold between trade execution and settlement?

You cannot do it online, but you can contact Vanguard customer service before settlement.

However, average cost is locked in once you sell. You have to elect out of average cost before placing the trade.

You select the exact shares you want us to sell or transfer. You can select this method at the time your trade is placed online or by contacting Vanguard before the end of the settlement date. If you are in average cost today, you’ll need to change your method to another method first to use this method.

If you plan to use this method for shares currently using the average cost method, we encourage you to plan ahead as you must elect out of average cost in writing before making the trade and it takes one business day to make specific identification data available for display online.

https://investor.vanguard.com/investor- ... ion-method

[talzara]

Yes. All of these brokerages are able to remove a lot from consideration in the holdings list immediately after it is sold, right? This isn't very different. Probably my boggle is primarily that they are touting this as a great step forward when it is the opposite of that.

Is there a competing brokerage that doesn't allow customers to specify lots for multiple limit orders?

There may be some small brokerages that can't do it, but I can't think of a brokerage of similar size that is as bad at IT as Vanguard. It was bad enough that Vanguard only allowed SpecID for the first limit order. Now it doesn't even allow it at all.

[talzara]

If we had another flash crash when I had a market order pending, I would not be a happy camper. The risk seems low, and a strategy would be to use a marketable limit order with the limit set well enough into immediately marketable territory that the trade requests functions like a market order in normal circumstances, but the limit serves as a guard rail to protect against an extreme event.

I guess that strategy may not work at present at Vanguard if choosing tax lots by SpecId.

Market orders are so risky that some brokerages never send market orders to the exchange. When their customers place a market order, they send a marketable limit order to the exchange.

Not every brokerage protects its customers by converting market orders to limit orders. That's why some people never place market orders, only limit orders. They may use marketable limit orders, but they are still limit orders that will not execute if the price moves too much in the wrong direction.

If Vanguard doesn't allow SpecID for limit orders, then Vanguard is not allowing its most cautious customers to use SpecID at all.

However, these people should not be using Vanguard. They should be using a brokerage that is much better at IT.

The last trade in Amalgamated Cannabis & AI Inc. was 20 minutes ago; someone bought 100 shares for $4 each. ...

• Because market orders are dangerous — what if the price spikes up to $69 for glitch or fat-finger reasons? — Robinhood, like some other retail brokers, automatically converts these market orders into limit orders.

https://www.bloomberg.com/opinion/artic ... ys-go-up-5

[clip651]

I suspect a lot of the most cautious customers are using mutual funds, not ETFs. There aren’t any choices of order types with mutual funds, aside from cost basis choices.

I certainly agree Vanguard’s IT should be improved though.

[grabiner]

Does the Vanguard Brokerage Service provide an easy way to change what shares are being sold between trade execution and settlement?

You cannot do it online, but you can contact Vanguard customer service before settlement.

However, average cost is locked in once you sell. You have to elect out of average cost before placing the trade.

Average cost is usually not allowed for stocks and ETFs, only for mutual funds, so this cannot be an issue with a limit order. (One exception is a DRIP.)

[rkhusky]

Terrible IT, eh?, yet 50M customers and $10T AUM. I’ll go with the market on this one.

[talzara]

Average cost is usually not allowed for stocks and ETFs, only for mutual funds, so this cannot be an issue with a limit order. (One exception is a DRIP.)

It doesn't matter that there are no limit orders for mutual funds.

You can't change the lots if it's average cost. Even though mutual fund trades settle in one day in the brokerage account, you can't use the settlement delay to change to SpecID and select lots. Average cost is locked in when you sell, not when the trade settles.

[talzara]

I suspect a lot of the most cautious customers are using mutual funds, not ETFs. There aren’t any choices of order types with mutual funds, aside from cost basis choices.

Yes, but the OP isn't. The OP is using limit orders to trade ETFs cautiously.

[clip651]

I suspect a lot of the most cautious customers are using mutual funds, not ETFs. There aren’t any choices of order types with mutual funds, aside from cost basis choices.

Yes, but the OP isn't. The OP is using limit orders to trade ETFs cautiously.

Agreed, that’s why I said “a lot” and not all of the most cautious.

[nps]

You cannot do it online, but you can contact Vanguard customer service before settlement.

However, average cost is locked in once you sell. You have to elect out of average cost before placing the trade.

Average cost is usually not allowed for stocks and ETFs, only for mutual funds, so this cannot be an issue with a limit order. (One exception is a DRIP.)

It's certainly allowed for Vanguard ETFs

[saves nine]

[I merged saves nine’s topic into the existing discussion - moderator ClaycordJCA.]

I recently received an email from Vanguard to this point:

"Effective January 2025, we're updating our method options for non-market orders (limit orders, stop orders, stop-limit orders). When submitting a non-market order, you'll need to elect a non-SpecID method. This change is part of our ongoing efforts to enhance the client experience, better align with industry standards, and streamline the trading process."

My search of the Boglehead site didn't find that this change had been treated. I don't follow the logic and thought someone here might provide clarity.