Schwab requires cleared funds before making purchase? Why?

[Aggie1999]

Recently I tried to make my first purchase in my Schwab brokerage account since having opened it with my initial deposit. I was surprised to find out that with Schwab you must transfer the funds from your bank first into the money market account (or whatever it is called) then the next day once the funds show up in Schwab you can make a purchase. This is what I was told by the Schwab CSR and what the website seems to enforce. Any option in the online account I am missing where you can buy funds at the same time the electronic bank transfer is initiated? Vanguard allows this. Thanks.

[g46r]

they want to make sure that you have the cash to settle the trade.  Trades are now settled on T+2 (US market) since 9/2/17 so any delay in ACH can cause settlement problems.

[trollwithamustache]

Does Vanguard actually allow this? or do they accept the order and the day the funds show up is the day's price you get?

[sokoloff]

Does Vanguard actually allow this? or do they accept the order and the day the funds show up is the day's price you get?

They allow it (or at least did the last times I did it in 2013 and the most recent was April-ish of 2017) on the same day as the ACH from a previously linked account. (I was ACH-ing in from ETrade to Vanguard and got that day's price.)

I'm 99+% certain of the above. (It's remotely possible that I got the next day's price, but I feel like I'd have noticed that and complained loudly at least one of the times I did it.)

[Aggie1999]

Yep on Vanguard buying the day the transfer is initiated:

Just submit a transfer before the close of the New York Stock Exchange (generally 4 p.m., Eastern time) and you'll get that day's closing price.

https://personal.vanguard.com/us/whatweoffer/accountservices/banking

I really don't even care about the same day trade. Just annoying with Schwab having to login the next day to do the trade.

[NoStacheOhio]

Fidelity allows same-day buys, but I think there's something in there about doing it as a courtesy, and if the funds don't clear you're in trouble.

[Financial.Velociraptor]

Is your account not authorized for margin?  You are probably on a cash basis there which is why they are requiring settled funds.  A lot of brokers do this tax advantaged funds as you technically aren't allowed margin trades.  Other brokers are willing to use a loophole to float you a few days when waiting on settlement.