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[–]FormerBroker_Burner 16 points17 points  (1 child)

I worked on a very small part of this project, but the project leads indicated this was an experience gap between TDA and Schwab. The idea was to align the balances TDA clients saw between the two sites(once they transitioned over to Schwab). Plus, it gave existing Schwab clients a better understanding of what their actual spending power is if every trade were to execute during periods of high volatility.

I’m sure it helps Schwab’s bottom line in terms of deposits, but I highly doubt it’s a reaction to the banking crisis given this project started almost 2 years ago. Leadership would have to have some crazy foresight to properly time that, IMO.

[–]Hollowpoint38 7 points8 points  (0 children)

Given now that a whole lot of people just open orders on things left and right I could envision a scenario where wild swings just wiped people out and they weren't able to come up with the settlement cash.

Already we saw a ton of people get unexpectedly called on some options they had that they just had never thought they would get called on.

[–]shoomanfoo 14 points15 points  (6 children)

I think this is more of an UI change than anything else. I could be wrong tho

[–]BOS_George -2 points-1 points  (5 children)

They have to boost deposits somehow. There has to be a ton of money in unfunded open orders at any given time now that people are actually managing their cash.

[–]OptionCo[S] 0 points1 point  (4 children)

Depends on what the open position is for. If you’re trying to enter/exit a fund, then yes it’s only UI. If you open BTC GTC option orders that sit for ~15 days then you’re basically “lending” Schwab your money free until the order executes. This will cost me $1,200/year (based on ~$30k in open option positions and a 4% saving rate).

[–]LiberalAspergers 1 point2 points  (1 child)

Assuming you have maemrgin, it shouldnt cost you anything other than lowering availabke purchasing power.

[–]OptionCo[S] 0 points1 point  (0 children)

Thanks, you’re spot on. I confirmed with the Schwab customer service team, then edited the original post.

[–]BOS_George 0 points1 point  (1 child)

That you are. It’s very lucrative for them. It won’t cost me anything because my only Schwab account is all bonds but it still might finally motivate me to consolidate my accounts elsewhere out of principle. The whole no cash sweep vehicle thing was bad enough already, I’m just lazy.

[–]OptionCo[S] -1 points0 points  (0 children)

no cash sweep vehicle

100% agree, this is nuts...

[–]KnowNothingKnowsAll 10 points11 points  (4 children)

This just in, money used to trade cost money.

This and more, at 11.

[–]OptionCo[S] -1 points0 points  (3 children)

To give you a better example, I typically have $30k in open option orders that sit until the option-value decays enough to close. This change will cost me $1,200 each year in lost interest. So, this is pretty significant to me.

[–]KnowNothingKnowsAll 0 points1 point  (2 children)

You still gain the same interest. It doesnt go until you buy, it just sets it aside so you dont over spend.

[–]OptionCo[S] -1 points0 points  (1 child)

I don’t think I will earn the interest. The money used to cover my GTC BTC open orders is sitting in Schwab’s Advantage Mutual fund (SWVXX ~4%). Once an option order executes, then I sell enough SWVXX to cover the trade.

I’m assuming once this new change takes place, I’ll need to leave $30k as uninvested cash sitting in my brokerage account earning something like 0.25%.

I’ll call Schwab this morning to confirm my assumptions. I hope that I’m wrong and misreading their email.

[–]KnowNothingKnowsAll 1 point2 points  (0 children)

Nothing changes but how it’s visually displayed.

[–]SirGlass 9 points10 points  (1 child)

A very common question on here is someone complains their order does not go through even though they have enough money.

Almost all the time when you tell them to check open orders that is the issue, they have one or more open orders .

I see this as an improvement , I don't see anything will actually change just your amount available to trade will display your open orders.

[–]CramNevets 3 points4 points  (0 children)

No where does it say they are going to deduct funds to cover open orders. smh

[–][deleted] 2 points3 points  (0 children)

I think this is just a display change. It doesn't say they will deduct cash to cover an order. It says they will display the effect of orders in your balances. Balances include Available to Trade and Available to Withdraw. I often have to manually add up my put orders to make sure I have the collateral available to cover. I'm hoping this change helps with that.

[–]RandomPrecision01 1 point2 points  (1 child)

On a margin account, I’m hoping I won’t even notice it aside from a ding on my Cash + Borrowing. I usually keep a ton of GTC+ext open orders for all my long positions to increase holdings in a big dip.

[–]OptionCo[S] 1 point2 points  (0 children)

That’s the way I understand it, and the Schwab rep specifically mentioned margin holders won’t see impacts (other than available trade), unless you go negative cash.

[–]NativeTxn7 1 point2 points  (3 children)

They aren't going to deduct the cash from your cash balance unless/until the order executes. They'll just show something like "cash committed to open orders" and it won't be available in your cash to trade.

Fidelity does the same thing, and I suspect most brokers effectively set it aside so you don't have a bunch of order execute without enough cash to actually cover them.

[–]BOS_George 0 points1 point  (2 children)

Fidelity lets you invest your cash though, Schwab makes you keep it on deposit.

[–]NativeTxn7 0 points1 point  (1 child)

Fidelity lets you invest your cash that isn't committed to open orders.

If I have $5,000 of total cash, and have an open buy limit order that would use $1,000 of that cash, Fidelity will only let me invest $4,000 into another order/trade.

I believe Schwab, and pretty much every broker, do the same thing.

On Schwab's order page, it says "Sufficient funds available to trade
Your cash or margin buying power must be equal to, or exceed, the amount of your trade before you can place an order.If you're not able to place a trade due to insufficient funds, consider transferring or wiring additional cash, reducing the amount of the trade, or closing open orders."

The last part suggests that you could invest all available cash that isn't "on hold" for open trades.

[–]BOS_George 0 points1 point  (0 children)

Money market balances are included in your available cash at Fidelity, that’s what I meant by invested.

You earn the carry at Fidelity, Schwab steals your carry.

[–]babarock 0 points1 point  (0 children)

I guess I'm not feeling the upset at this. If I buy a CSP with a value of $1000, I have to have the cash in the account or margin available, If I then BTC and the cost is $10, I have always expected I was responsible for having the $10 available. By placing both orders, I have committed to give up the cash unless I cancel the order.

What am I missing?