Is there an accepted settlement "time of day"?
Is there an accepted settlement "time of day"?
ETFs transitioned to T+1 this year from T+2. For those familiar with the backends, is there an accepted "settlement time of day"?
E.g. is an etf buy executed during market hours on t+0 settled on:
a) t+1 at the same time the buy executed?
b) t+1 at market close?
c) t+1 at whatever time the broker chooses to run their backend updates, up to 23:59 at the latest?
E.g. is an etf buy executed during market hours on t+0 settled on:
a) t+1 at the same time the buy executed?
b) t+1 at market close?
c) t+1 at whatever time the broker chooses to run their backend updates, up to 23:59 at the latest?
Re: Is there an accepted settlement "time of day"?
There can also be a difference between when the settlement occurs and when the settlement is visible to you online.
Vanguard sometimes does not update the user interface until shortly before market opening the next day. I have never had obsolete information online after 9:00 AM but I have had yesterday's information as late a 5-6AM.
Vanguard sometimes does not update the user interface until shortly before market opening the next day. I have never had obsolete information online after 9:00 AM but I have had yesterday's information as late a 5-6AM.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Re: Is there an accepted settlement "time of day"?
Depends. However, I think brokers that don't settle trades before the market opens on T+1 should be avoided.
Re: Is there an accepted settlement "time of day"?
Trades settle in the overnight batch process. When exactly that happens depends on the brokerage but it really doesn’t matter because you won’t be able to access it until the next day.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Re: Is there an accepted settlement "time of day"?
Thank you Alex, when you say "overnight" are you referring to "before 23:59 on T+0" or "before 23:59 on T+1"?
Specifically I'm trying to ensure this order doesn't get reversed/frozen when my broker receives the ACATs
Re: Is there an accepted settlement "time of day"?
Yes, and to clarify and muddle and complicate things, my understanding is this batch process is run after close on settlement day, cash and security ownership is recorded and on the ledger at that time. Basically I was told to forget what's on the web page, this is how the process actually works behind the scenes, and not to worry about it unless you are cash negative after that batch run.
But if I understood incorrectly, I'd like to know, anybody on here involved with that batch process?
Re: Is there an accepted settlement "time of day"?
So that would be sometime after 4pm on t+1 but before 9 am of t+2.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Re: Is there an accepted settlement "time of day"?
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Re: Is there an accepted settlement "time of day"?
I've heard that, even in a specific brokerage, the settlement transactions can occur at different moments for different orders.
Lets say you place two orders on the same day:
(initial cash balance $0)
1) Sell AAAA for $1000
2) Buy BBBB for $1000
During settlement, order #2 might settle before order #1. But you didn't have the cash to execute #2 at that moment resulting in a trading violation.
My person at Schwab gave this as a reason to keep the margin feature active on my taxable account (despite my intention never to buy stocks on margin). The 1-hour margin loan for $1000 would eliminate the trading violation and result in no interest.
Lets say you place two orders on the same day:
(initial cash balance $0)
1) Sell AAAA for $1000
2) Buy BBBB for $1000
During settlement, order #2 might settle before order #1. But you didn't have the cash to execute #2 at that moment resulting in a trading violation.
My person at Schwab gave this as a reason to keep the margin feature active on my taxable account (despite my intention never to buy stocks on margin). The 1-hour margin loan for $1000 would eliminate the trading violation and result in no interest.
Re: Is there an accepted settlement "time of day"?
This particular transaction pattern is so common that I would be very surprised to see it leading to trading violations; there would be a huge number of violations if it did. Investors do this every time they sell and buy ETFs to rebalance, or harvest an ETF loss and buy another ETF, or otherwise switch their holdings.ccieemeritus wrote: ↑Mon Oct 21, 2024 4:32 pm I've heard that, even in a specific brokerage, the settlement transactions can occur at different moments for different orders.
Lets say you place two orders on the same day:
(initial cash balance $0)
1) Sell AAAA for $1000
2) Buy BBBB for $1000
During settlement, order #2 might settle before order #1. But you didn't have the cash to execute #2 at that moment resulting in a trading violation.
Re: Is there an accepted settlement "time of day"?
This was a slight issue when people were selling stocks and bonds with a t+2 or (from personal experience when in brokerage operations) t+3 and then buying mutual funds that settled t+1.grabiner wrote: ↑Wed Oct 23, 2024 8:32 pmThis particular transaction pattern is so common that I would be very surprised to see it leading to trading violations; there would be a huge number of violations if it did. Investors do this every time they sell and buy ETFs to rebalance, or harvest an ETF loss and buy another ETF, or otherwise switch their holdings.ccieemeritus wrote: ↑Mon Oct 21, 2024 4:32 pm I've heard that, even in a specific brokerage, the settlement transactions can occur at different moments for different orders.
Lets say you place two orders on the same day:
(initial cash balance $0)
1) Sell AAAA for $1000
2) Buy BBBB for $1000
During settlement, order #2 might settle before order #1. But you didn't have the cash to execute #2 at that moment resulting in a trading violation.
It is and isn’t a big thing.
Operations get audited on how well they police this activity. So I am confident that it is being monitored.
On the other hand it is akin to speeding. You tend to be let off the first time with a warning. It is a common error that many people make and has a low impact. Repeat offenders are treated differently.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Re: Is there an accepted settlement "time of day"?
Fwiw yesterday at Fidelity I sold some ETF shares at about 2pm. I was able to withdraw the settled funds this morning when I first checked at about 7am.
Re: Is there an accepted settlement "time of day"?
This has been my experience with Fidelity for ETFs as well since T+1 began. By the time I'm up and am having my first coffee, settlement has occurred.
Cheers.
"Repeating a thing doesn't improve it." Quote from Inman, as played by Jude Law, in the movie "Cold Mountain"
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Re: Is there an accepted settlement "time of day"?
That's reassuring. I have a somewhat large credit card autopay coming up on day T and was wondering whether I should sell ETFs on T - 1 or T - 2. Sounds like T - 1 is good to go!
Re: Is there an accepted settlement "time of day"?
Re: Is there an accepted settlement "time of day"?
Because then it would be t+0.
I don’t know how Fidelity exactly operates. I know that the cash hasn’t been deposited yet. Maybe it is a costumer service thing. Can you actually get the cash the next day? Wire it out for example? If they did then Fidelity would have to float the cash for you which costs them interest.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Re: Is there an accepted settlement "time of day"?
Yes, I can get cash out the morning after I place a sell order that is executed. That is at WellsTrade where transfers to WF checking are almost instantaneous and not done by ACH. It is true that my other financial institutions use ACH to transfer to my external checking account and that takes one more day to make the transfer request on T+1 when the money appears in the brokerage settlement account, but that is separate from T+1 discussion. I have not needed to try to wire money out the same day as T+1.alex_686 wrote: ↑Fri Oct 25, 2024 6:22 amI don’t know how Fidelity exactly operates. I know that the cash hasn’t been deposited yet. Maybe it is a costumer service thing. Can you actually get the cash the next day? Wire it out for example? If they did then Fidelity would have to float the cash for you which costs them interest.
Last edited by livesoft on Fri Oct 25, 2024 6:53 am, edited 1 time in total.
Re: Is there an accepted settlement "time of day"?
My next day settled funds were available for electronic transfer in the morning. The same balance is used for ATM availability so I could have gone to an ATM and gotten physical cash. Fidelity has fast ACH so my morning transfer actually posted at the bank about 12pm same day, less than 24 hours from the time I actually sold the shares.alex_686 wrote: ↑Fri Oct 25, 2024 6:22 amBecause then it would be t+0.
I don’t know how Fidelity exactly operates. I know that the cash hasn’t been deposited yet. Maybe it is a costumer service thing. Can you actually get the cash the next day? Wire it out for example? If they did then Fidelity would have to float the cash for you which costs them interest.
Re: Is there an accepted settlement "time of day"?
So then what happens if you purchase shares of an ETF during market hours on Friday, and then enter a “full” acats on Sunday night just before midnight Mon? Sending firm will probably get the request around market open on t+1
Re: Is there an accepted settlement "time of day"?
Ok, I did the test. I purchased ETF shares before market close Fri, put in ACATs transfer at new broker Sun evening. I got email ~6:30a ET Mon from sending broker. Everything came over fine, no issues/warnings/rejections.
Different broker, I then bought ETF shares Mon, and put in acats Mon evening before. I got email ~6:30a ET Tues from sending broker. Again everything came over fine, no issues/warnings/rejections.
Re: Is there an accepted settlement "time of day"?
Thanks for trying that.nalor511 wrote: ↑Wed Oct 30, 2024 9:18 pmOk, I did the test. I purchased ETF shares before market close Fri, put in ACATs transfer at new broker Sun evening. I got email ~6:30a ET Mon from sending broker. Everything came over fine, no issues/warnings/rejections.
Different broker, I then bought ETF shares Mon, and put in acats Mon evening before. I got email ~6:30a ET Tues from sending broker. Again everything came over fine, no issues/warnings/rejections.
Did you request a full account transfer? Or a partial account transfer that specified to transfer the newly-bought ETF?
Re: Is there an accepted settlement "time of day"?
Full transfer both times but I think partial would have worked fine. The email from sending broker indicated they didn't get the request until "settlement day", which from my reading of finra rules https://www.finra.org/rules-guidance/ke ... fers#rules seems they don't have cause to hold back the shares (even if they didn't run their 'overnight cycle' yet). The shares don't get actually transferred until days later anyway. Glad it all workedsycamore wrote: ↑Thu Oct 31, 2024 7:11 amThanks for trying that.nalor511 wrote: ↑Wed Oct 30, 2024 9:18 pm
Ok, I did the test. I purchased ETF shares before market close Fri, put in ACATs transfer at new broker Sun evening. I got email ~6:30a ET Mon from sending broker. Everything came over fine, no issues/warnings/rejections.
Different broker, I then bought ETF shares Mon, and put in acats Mon evening before. I got email ~6:30a ET Tues from sending broker. Again everything came over fine, no issues/warnings/rejections.
Did you request a full account transfer? Or a partial account transfer that specified to transfer the newly-bought ETF?