I bought an etf featuring 250 of the biggest companies in the world, through you.
Average 1000 shares a day trade via London, plus more on other international exchanges.
The fund is valued over £500m.
It has been trading for 5 years
Not massive, but hardly niche, well-established, low-cost and liquid. I checked all those things prior, to help minimise uncompensated risk.
Settlement is late. Now T+4+ and counting, so twice as long as expected.
Obviously that risks a financial loss I would be exposed to due to your processes and providers. See issue 102398
WHY 2 potential reasons given :
liquidity - for 250 of the biggest companies in the world.
volatility - which is back down to levels not seen for 5 years.
THE FULL STORY?
So, I think, what could be the real reason?
Maybe a counterparty risk amongst providers that is not clear.
Possibly fractional shares are the problem, that there is some unconventional ‘off-exchange’ process going on.
I am speculating, as the response I received was a generic answer.
QUESTIONS
Are we exposed to an uncompensated risk that we need to consider more fully?
As an alternative to going elsewhere, would buying in small lots over multiple days, even for liquid investments, reduce the risks we are exposed to via your counterparties and processes?
Is there a problem inherent in fractional ownership specifically that causes delays in trading?
Why so long? looks like it comes down to a relatively thinly-traded ETF (1k shares a day on the LSE). Shouldn’t matter, but clearly it can.
It didn’t matter that it owned only the largest-cap multi-nationals - though, if the ETF content were thinly-traded too, that could exacerbate the problem.
Basically, stick to the huge ETFs that own the stuff everyone wants to own, if you want best chance at a quick settlement.
If you have a fund in mind, the link shows daily volume (1k/day is very small fry). UK listed ETFs volume
I looked too whether it is about fractional purchases delaying - nope, IE buys whole shares like everyone else, but retains the bit you didn’t buy.
Was it some unconventional “off-exchange” process? Yes it was. That shouldn’t matter to settlement nor price though - but the price of my ‘thinly-traded’ fund dropped conveniently for the counterparty just as my sell trade went through. Keeping to large-volume etf’s should limit the potential for those games.
I was informed by IE “we are currently working on adding a new feature to our platform, that will allow clients to cancel their orders with delayed settlement, even after they were executed.” So it appears IE had enough of it too, and is looking to bring new functionality.
NOTE not advice, my interpretations only - as ever, ‘do your own research’
Hello @nedjohn !
Hope you’re great.
Please see below a further detailed explanation which helps highlight the reasons why unsettled trades may occur and how we aim to resolve the issue for you as soon as possible:
Why are you, as a client seeing this issue?
We use registered Market markers on the London Stock Exchange (LSE) to place all our ETF trades; these providers allow us to achieve the best execution for our trades.
However, due to the generally lower volumes and values for many of InvestEngine’s trades, it’s not always practical for our Market makers to fulfil these orders immediately (or within the expected time frame of two days). They often group trades together and manage their book of orders.
It is important to understand that the prices are locked in once we’ve made the trade; if the price goes up or down, you are locked into the price at the execution time. However, we have seen a delay in the settlement/delivery of shares.
What is InvestEngine doing about it?
Firstly, engaging with our market makers - to make sure they settle more of our trades on time. As we get bigger, this is becoming less of an issue.
Secondly, working to eliminate the impact on our clients. We will be changing our trading rules in the future to allow clients to sell those holdings impacted (without waiting for settlement). This will eliminate the practical issues clients are experiencing not being able to sell and rebalance.
This solution is actively being worked on as our top priority - we need to ensure we’re still meeting our regulatory obligations with segregated client funds and assets being held in client nominees on CREST, so it’s not as straightforward. But we believe we’ll be able to provide an update in the coming few weeks, which we will share with the Community first.
We do understand your frustration with unsettled transactions, and we hope to have this sorted out very soon.
Once again, thank you for your continued patience and please do not hesitate to get in touch if you have any other questions.
I love many of the IE features, but I’m getting increasingly frustrated with the late settlements, late dividend payments, no option to buy whole shares and the once a day after 3pm trading model. My dividends arrive quite often more than 3 days after the payment date when other platforms pay the same day. I still haven’t received my 1st April dividends from 2 of my SPDR ETFs and I’m not even sure if I’ll receive one of the payments at all as I placed the order on 21 March, before the 24 March ex-dividend date, but the order settled on 26 March.
I’m trying to convince my self that the positives of using this platform outweigh the negatives, but the only thing that’s keeping me here at the moment is the business investment account option.
I too think IE is brilliant for us investors, but wish they could get settlement down to trade +1 day rather than +2. I am extremely impressed with the fact that the SIPP is fee free and may this long continue.
At the moment London Stock exchange is working on T+2 days - and no platform or provider can move faster than that right now.
However, there are considerations in place to move to T+1 as United States, Canada, Mexico and Argentina have already done but for the UK this looks to be coming in 2027 ~ish.
