Vanguard email - You don't have enough money to pay for a recent trade

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Dimitri
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Vanguard email - You don't have enough money to pay for a recent trade

Post by Dimitri » Mon Aug 22, 2016 9:18 pm

I checked my email this morning. Not an everyday occurrence but I'm glad I did because the subject line of one of my emails was You don't have enough money to pay for a recent trade. It was from Vanguard.

I made a couple of trades last week in my Vanguard Brokerage account. I knew I had enough in my Prime Money Market Fund to pay for them.

Reading further, the email informed me that:

Your account was affected by a recent change Vanguard Brokerage Services® made to use Vanguard Federal Money Market Fund as the designated settlement fund for all brokerage accounts. Because this occurred, your previous settlement fund is no longer linked to your account, and your new settlement fund (the Federal Money Market Fund), now held within your brokerage account, doesn't have enough money to pay for the trade. This change was related to the Securities and Exchange Commission's money market reform rules. You would have received notification from Vanguard about the change.

I do recall seeing something relating to the Federal Money Market Fund being used instead of the Prime Money Market Fund. But I didn't realize that I would have to do anything about it. I thought the money would just be transferred over seamlessly.

The good news is that everything worked out. It took me a few minutes to understand what exactly the email was telling me I had to do. I only wish that I had been forewarned that I would have to move the funds myself or that the explanation of what to do had been a bit clearer.

That said, I recommend that anyone with a Vanguard Brokerage account check to see if you have funds sitting in your Prime Money Market Fund and if you do remember that you will need them to be in your new Federal Money Market Fund to settle trades.
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Pharmacist
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Re: Vanguard email - You don't have enough money to pay for a recent trade

Post by Pharmacist » Tue Aug 23, 2016 1:40 am

Dimitri wrote:I checked my email this morning. Not an everyday occurrence but I'm glad I did because the subject line of one of my emails was You don't have enough money to pay for a recent trade. It was from Vanguard.

I made a couple of trades last week in my Vanguard Brokerage account. I knew I had enough in my Prime Money Market Fund to pay for them.

Reading further, the email informed me that:

Your account was affected by a recent change Vanguard Brokerage Services® made to use Vanguard Federal Money Market Fund as the designated settlement fund for all brokerage accounts. Because this occurred, your previous settlement fund is no longer linked to your account, and your new settlement fund (the Federal Money Market Fund), now held within your brokerage account, doesn't have enough money to pay for the trade. This change was related to the Securities and Exchange Commission's money market reform rules. You would have received notification from Vanguard about the change.

I do recall seeing something relating to the Federal Money Market Fund being used instead of the Prime Money Market Fund. But I didn't realize that I would have to do anything about it. I thought the money would just be transferred over seamlessly.

The good news is that everything worked out. It took me a few minutes to understand what exactly the email was telling me I had to do. I only wish that I had been forewarned that I would have to move the funds myself or that the explanation of what to do had been a bit clearer.

That said, I recommend that anyone with a Vanguard Brokerage account check to see if you have funds sitting in your Prime Money Market Fund and if you do remember that you will need them to be in your new Federal Money Market Fund to settle trades.

At least Vanguard caught it. ETrade lets you trade unsettled funds. My friend did it unintentionally and got a letter in the mail from (apparently) the government and freaked out and had some kind of restriction placed on his account where he had to call to make trades for a few months.

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oldcomputerguy
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Re: Vanguard email - You don't have enough money to pay for a recent trade

Post by oldcomputerguy » Tue Aug 23, 2016 5:32 am

Interestingly, I had forgotten about the change announced by Vanguard, and when I just checked my account, it shows I'm still set up to use Prime (not Federal) Money Market as my settlement account; Federal Money Market doesn't even appear.

Strange.
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DaleMaley
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Re: Vanguard email - You don't have enough money to pay for a recent trade

Post by DaleMaley » Tue Aug 23, 2016 6:18 am

I had a more serious problem with the Vanguard change, they bounced my check to the County to pay my property taxes!!

I posted my problem here......

viewtopic.php?f=1&t=192805

When the change was made to the account, I didn't realize that after 60 days, Vanguard Prime money market checks would no longer be honored by vanguard. I swear they didn't tell me about this issue on the phone, or mail, or email. They did contact me and tell me they were going to bounce the check because it was past the 60 day period.

So if your account is "upgraded", there are several issues you should be aware of, including the need to file a form to get new checks and to get money from your Prime Money market fund if the settlement fund is dry.
Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. – Warren Buffett

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DaleMaley
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Re: Vanguard email - You don't have enough money to pay for a recent trade

Post by DaleMaley » Tue Aug 23, 2016 6:22 am

The Vanguard rep told me that the first accounts to be "upgraded" are ones where there are non-Vanguard holdings (other funds or common stocks). Eventually, all accounts will be upgraded.

I have many family members who use Prime Money Market checks infrequently. They will be impacted when the time comes for their account to be upgraded.
Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. – Warren Buffett

Wagnerjb
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Re: Vanguard email - You don't have enough money to pay for a recent trade

Post by Wagnerjb » Tue Aug 23, 2016 8:41 am

Dimitri wrote:I checked my email this morning. Not an everyday occurrence but I'm glad I did because the subject line of one of my emails was You don't have enough money to pay for a recent trade. It was from Vanguard.

I made a couple of trades last week in my Vanguard Brokerage account. I knew I had enough in my Prime Money Market Fund to pay for them.
I got the same email about 6 weeks ago. Mine was a timing issue.

I had made a trade, and I had plenty of funds in my Prime Money Market fund for the trade. A day or two after the trade, my account was upgraded and the Federal MM fund became the new sweep fund. Evidently, Vanguard's conversion failed to deal with trades in progress, so my trade tried to settle on the (empty) Federal MM fund. I got the email from Vanguard while I was traveling and it was annoying and frustrating - I had to call them from the airport lounge. Fortunately, they fixed the problem without requiring me to log in or do anything else.

But just getting the email was alarming and annoying in the first place....especially when it didn't need to happen.

As much as I love Vanguard's low-cost passive funds, this is the price we pay for having a low-budget operation like Vanguard.

Best wishes.
Andy

Shallowpockets
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Re: Vanguard email - You don't have enough money to pay for a recent trade

Post by Shallowpockets » Tue Aug 23, 2016 8:51 am

I takes three days for a trade to settle.

Free riding (also known as Freeriding or Free-riding) is a term used in stock-trading to describe the practice of buying and selling shares or other securities without actually having the capital to cover the trade. In a cash account, a free riding violation occurs when the investor sells a stock that was purchased with unsettled funds.

The Federal Reserve Board's Regulation T requires brokers to "freeze" accounts that commit freeriding violations for 90 days. Accounts with this restriction can still trade but cannot purchase stocks with unsettled sale proceeds (stocks take three days to settle).[1]

Freeriding can be avoided by using a margin account.

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