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T+1 Settlement Starts on 28 May 2024

T+1 settlement for stocks/ETFs/CEFs will start on May 28, 2024. This should eliminate the confusion that is possible now with T+1 for mutual funds/OEFs, but T+2 for others.
https://www.thinkadvisor.com/2024/02/05/t1-starts-in-may-are-you-ready/

Comments

  • edited February 5
    Whew!
  • edited February 5
    About time,, when did computers come on the scene... 1970-80? Only took 40 years to get to T+1
  • edited February 6
    gman57 said:

    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
  • edited February 6
    @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.
  • Fidelity will let you do a same day, cross-family exchange if you place the order over the phone

    Is there not an extra charge for over the phone transactions?
  • Just curious, is it T+0 even for non- Merrill MMs?
  • msf
    edited February 6
    hank said:

    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.
    BaluBalu said:

    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.

    https://olui2.fs.ml.com/Mutualfunds/MFBDCashManagement.aspx

  • Thanks @msf. We like you too.:)
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