- 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.
- 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?
Thank you for raising this issue and providing some plausible explanation for what is going on.
Late settlement (and the background reasons behind it) is a big factor in deterring me from placing any more funds with InvestEngine.
There just doesn’t seem to be sufficient transparency - or urgency in finally resolving.
delinquent order settled at T+5
I suspect I gained an insight into the underlying issue causing long settlement.
I have an idea the liquidity problem is not so much related to the underlying investments, it is the wrapper that is significant, and maybe the way it is sliced too.
Which makes me disinclined to hold the particular investment.
It is being sold - that too may take a while, which could confirm the reason.
Hi @nedjohn, what was the ETF?
I rather not point fingers at a specific etf at this point, as I think it is more general.
I am making a few other trades to confirm.
A clue…looking to offset big-7 concentration, reduce downside risk, diversified and liquid.
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’