Of course, I'm a 'buy and hold' investor so this doesn't really effect me much, but it's the principle of the matter.
Vanguard is more and more becoming a group that just wants to run ETFs and if you want to use them, they're making it harder and harder. They recently dumped all their 401(k) and similar plans from being in-house to some other provider.
Saves costs, makes support annoying.
Of course, you can use a Fidelity account to own Vanguard ETFs if you wanted.
> Vanguard is more and more becoming a group that just wants to run ETFs and if you want to use them, they're making it harder and harder. They recently dumped all their 401(k) and similar plans from being in-house to some other provider.
If this is true, then it must for individuals.. My company moved a little over a year ago TO vanguard for 401ks
Horrible move on their part, if I didn't want some provider diversification I'd just move everything over entirely at this point.
Which I would highly recommend if you ever want to change brokers. the fidelity ZERO products are great but can only be held at fidelity while VOO shares can be transfered to any broker.
I sold and bought recently (because transfer looked like paperwork hassle to me): had a small transaction cost, and the main disbenefit was losing transaction history e.g. buy date was now reset; it was tax neutral for me either way.
https://www.ascensus.com/about-us/press-room/news/ascensus-t...
This post was a reminder to get those moved out of Ascensus into Fidelity if possible.
Funny business can absolutely be pulled during rebalancing.
Another big one is securities lending income. Vanguard pays that out to investors which effectively creates negative expense ratios in certain funds. Index funds from other issuers don’t necessarily share that securities lending income with customers.
As a practical matter, since dealing in mutual funds' shares is settled after market, "front running" these transactions would be problematic. (Impossible, I'd say?)
I put the word in quotes, because this is a perfectly legitimate way of front running. The major indices are all public, and anyone can take a crack at this. In other words, if I announce to the world a month in advance that on a specific day and a very specific time of the day (at the closing auction) I'm going to buy X amount of specific stocks and sell Y amount in other stocks, I can't blame people for using that information against me.
> Basically every index of any significance is already being monitored and rebalancing effects are "front-run" this way.
> I put the word in quotes, because this is a perfectly legitimate way of front running.
No; it is not "front running."
as a "consumer" of the mutual fund, you can't.
but the mutual fund itself makes large trades: somebody downstream executing those trades or having access to that data could front run.
But you can't front run shares of mutual funds; they always trade at close of business at NAV.
You could potentially front run ETFs, but if you're worried about that, you can use limit orders and get the price you want or not transact. As long as you use a competent broker that offers limit orders.
> A form of front-running in index funds is common and isn't illegal.
> Index funds track a financial index by mirroring the index's portfolio. The composition of the index changes periodically to balance it accurately as the stocks that make it up change dramatically in price or as stocks are added or removed from the index. That forces the fund's managers to buy or sell some components of the index.
Otherwise, I wouldn't call those things front running, as there's no indication of imminent activity.
If a material increase in lending rates on a heavily shorted stock was announced, and you bought because you were pretty sure the shorts would be buying to close, that could be front running, yeah.
I dunno about market moves based on Elon's role in the culture wars, but maybe if he did something in particular.
In general, buy on the rumor, sell on the news could qualify as front running under this definition, but I think I'd want to narrow it a bit to working to trade ahead of perceived imminent and definite trades. Most of the illegal front running is trading ahead of specific trades in response to seeing those orders.
Any evidence this is actually happening, rather than something like "this ETF rebalances every quarter, they're unbalanced, and are expected to rebalance in this way", or "this company is probably going to get included in the S&P 500 because it's doing really well"? What makes this sort of "front running" less acceptable than buying because "I like the stock", or trading on technical analysis?
https://www.sec.gov/newsroom/press-releases/2021-118
https://www.sec.gov/newsroom/press-releases/2021-186
https://www.sec.gov/newsroom/press-releases/2022-228
Trading ahead of index funds when an index change is announced is front running in my book, but it isn't illegal front running; but I don't consider it less acceptable than buying because the graph makes a funny shape.
>https://www.sec.gov/newsroom/press-releases/2021-118
>Wygovsky repeatedly traded in his family members’ accounts held at brokerage firms in the United States ahead of large trades that were executed on the same days in the accounts of his employer’s advisory clients.
>https://www.sec.gov/newsroom/press-releases/2021-186
>Polevikov had access to real-time, non-public information about the size and timing of his employers' securities orders and trades, and used that information to secretly trade on, and ahead of, his employers' trades.
>https://www.sec.gov/newsroom/press-releases/2022-228
>Billimek would inform Williams of the asset management firm’s market-moving trades prior to their execution
I never said trading a stock ahead of it being added or removed to the S&P 500, or between the announcement of it being added or removed and index funds actually purchasing it is illegal, immoral, or unfair, or less acceptable than any other trade.
Just that it's front running. And then you asked if there were examples of illegal front running, so I provided those --- which aren't examples of trading ahead of index funds, because trading ahead of index funds isn't illegal.
I'm not really sure what you're asking at this point.
Citaldel paid handsomely for order-flow information from Robinhood. They made a lot of money off retail traders. They paid a fine IIRC equivalent to a few day's profits.
If you are curious about a brokers position on PFOF you can look up their disclosures. SEC Rule 605, 606 and 615 are the search terms you want when looking these up. Fidelity has a similar disclosure on this as Vsnguard, which is that they don’t engage in PFOF except for some options markets.
Robinhood got in trouble for false advertising about PFOF not because they engaged in it, because again, PFOF is not front running and not illegal.
While the studies on how PFOF effects execution quality are varied, this summary [1] from Wharton seems fairly balanced. It's not as simple as citing NBBO and moving on.
Personally I'm suspicious of the practice mostly because of the pretty clear conflicts of interest that it creates. Again, this is controversial, but the people arguing it's ok are for the most part making money from it.
[1] https://wifpr.wharton.upenn.edu/uncategorized/research-spotl...
Edit: No, it's not in the US at least. It mostly just allows the broker to internalize orders if they prefer.
I consider most financial institutions to be criminal because it is always their clear intention to circumvent the spirit of the law as closely as possible. The intention is to reap the benefits of breaking the law, without the risk of consequence. When the pitchforks come, these are going to be the criminals being chased down the street.
By the same token, I do not consider a parent who writes a bad check for groceries to be a criminal.
What in particular do you see as against the spirit of the law?
If you have a legal route to $1M and an illegal route to $1.5M, the rational calculation for fines is against the $0.5M delta, not the full amount.
[0] https://www.fidelity.com/trading/execution-quality/overview