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Bay Street is fighting over high-interest ETFs that retail investors love, sparking a federal review, say sources
March 10, 2023
8:45 am
NorthernRaven
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From a regulatory perspective, the possibility of liquidity problems in a heavy redemption run is something they may want to examine. But in practice, the short term holdings appear to be with Big6 banks (the Globe story says mostly BNC, BNS and CIBC), it isn't commercial or government paper. That's funding for those banks, so they have an interest in things not blowing up. They could provide liquidity against those holdings for a fee, for instance.

Presumably, "breaking the buck" would require concerns in the underlying banks, much like Lehman's collapse triggered things back in 2008.

March 10, 2023
9:00 am
savemoresaveoften
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NorthernRaven said
From a regulatory perspective, the possibility of liquidity problems in a heavy redemption run is something they may want to examine. But in practice, the short term holdings appear to be with Big6 banks (the Globe story says mostly BNC, BNS and CIBC), it isn't commercial or government paper. That's funding for those banks, so they have an interest in things not blowing up. They could provide liquidity against those holdings for a fee, for instance.

Presumably, "breaking the buck" would require concerns in the underlying banks, much like Lehman's collapse triggered things back in 2008.  

Back then "break the buck" happened cuz those were money market funds and they held more or less commercial and corp paper with diff maturity. So its much "easier" to get pushed into a liquidy crunch. That characteristic made it a very different animal from these cash etf. The likelihood of a cash etf trading below NAV is much less likely than money market fund in my mind.

March 10, 2023
10:11 am
AltaRed
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I think this is mostly a red herring probably by the likes of TD and RY who don't like some of the money market flowing away from them to their competitors. Tough luck is all I can say. They have the option to play or not.

August 21, 2023
1:43 pm
FastJonny
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savemoresaveoften said
.....

TD and RY blocking investors from buying them is just a business decision to protect their cheap funding source, not to protect the investors for sure.  

I got a note from RBC DI (dated Aug 16 2023) that I just saw now.

"Effective October 31 2023, RBC Direct Investing Inc. is amending the ‘Conflicts of Interest Disclosure’, section 3 to delete the following sentence:

“RBC Direct Investing does not currently offer high interest savings account ETFs.”

Access to high interest savings account Exchange Traded Funds (ETFs) is now available on the platform."

I have not investigated the actual site to see how or if they are yet available.

August 21, 2023
5:33 pm
COIN
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What interest rate are these ETF's paying now?

Last time I looked they were still below Simplii, Tang, DUCA, etc.

August 22, 2023
2:39 pm
TINAisOver
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Those ETF's interest rates vary month to month as they are paid out as dividends but recorded as interest income at the end of the year for tax purposes . So depending on how you want the formulate the numbers you will get differing rates. Each of those ETF issuers do not use the same formula to derive a return rate so you have to do your own math. BTW, you should work out the dividend rate for any dividend stock as apposed to rely on dividend algorithm, often they are not correct.

Also , I assume you are referring to GIC rates from Simplii, Tang, DUCA, etc. To be fair this would not be an apples to apples comparison since those are term deposits and the etfs have no time obligation. In general one is giving up a higher interest for keeping your funds extremely liquid. This means you are collecting a return while you are waiting for an opportunity. The moment you sell the ETF ( or any stock) those funds are immediately available for deployment. As apposed to having money locked in.

Trader first, Saver second

August 22, 2023
7:41 pm
Loonie
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thanks for the explanation.
Would perhaps be good for someone hoping to buy a home in near future but unable to predict when.. On the other hand, there are very good HISA promos available at several FIs now,.

August 23, 2023
8:36 am
mw
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I am newbie on this ETF, can I ask question, the interest or dividend pay on the end of the month or pay on the year, if I redeem the fund on the middle of the month, do I still get interest dividend ?

is any chance I cannot sell my funds as no one accept the offer ?

is any chance you get back less than the principal?

Thanks information.

August 23, 2023
9:26 am
mordko
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mw said
I am newbie on this ETF, can I ask question, the interest or dividend pay on the end of the month or pay on the year, if I redeem the fund on the middle of the month, do I still get interest dividend ?

is any chance I cannot sell my funds as no one accept the offer ?

is any chance you get back less than the principal?

Thanks information.  

They usually pay monthly.

Who gets interest depends on who is the owner of the shares on ex-dividend date. Cash.to has ex-div date at the end of the month: https://seekingalpha.com/symbol/CASH:CA/dividends/history

You are typically trading with a market maker. They take a small cut on the spread. Which means that they keep the price of these instruments stable but you will typically sell for a little bit less than when you buy.

In exceptional circumstances you may lose money. The risk is always there whenever you give money to any institution. But with hisa ETFs this risk is tiny.

August 23, 2023
2:20 pm
TINAisOver
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Perhaps I can add a little more detail to supplement Mordko's reply.
Those ETF's, which I will call the Money Market ETF's as to how they are categorized in ITRADE's ETF screener, there is about 10 of them and also some USD ones in addition. They trade and pay out dividends just like any stock, the method is identical. The difference is company stock values fluctuate on perceived value from moment to moment and are based on anything and everything. But a money market ETF's asset holdings are literally money. They hold money in bank accounts, like anyone does, and or a combo of very short term bonds. So there value increases over time with certainty (most likely).

Example : I will use CASH.TO . Its assets nearly a 100%, according its Data sheet (horizons ETF), are bank savings accounts held at National bank, CIBC, and BNS. ex-dividend date is actually day one or the start of the new dividend period, paid monthly. CASH.TO will be priced at $50 (the bid that is, the ask is 1 cent more, the usual spread) . ex -div. date averages 28 days (give or take 3 days). Currently the dividend amount is averaging 0.22 cents. So over the next 28 days the value of CASH.TO will incrementally increase to $50.22 , until the end of the trading day the day before ex div. day. If you're holding the ETF after end of trading day, you will receive the dividend. You don't have to hold the ETF the whole time. You can buy it a second before market close on day before Ex Div. day and receive the dividend. The process starts all over again. CASH.TO will be priced at $50.00 (Closing price on trading day before ex-div. day - (minus) dividend amount (0.22 cents) . This amount will paid out about 5 days later.

The question , asked by MW, can you lose money buying these ETF's? It is possible, but you will have to go out of your way to accomplish this. I guess one can buy and sell on the same day and lose the spread and or the trading fees.

Before trading in these products . Go through the ETF's data sheet . Review it's holding , MER , payment history and study their charts at all intervals.

I use them in my overall trading strategy. Instead of holding money earning zero in my margin or cash account, I place my unused funds in these ETF's to earn a decent return at no risk while I wait for opportunity. I can then sell those ETF's and immediately use those funds to buy something else.

CASH is one of my fav's. it has a low MER and a higher trading volume than the others .
Some Other MM ETF's are: ZMMK, CMR, CBIL, CSAV, HISA . (these I am just listing and not suggesting in any way)

I hope this info wasn't too much and confusing.

TINAisOver

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August 23, 2023
7:05 pm
suburbs4life
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In essence you are saying CASH is more desirable than PSA due to lower MER, higher volumes?

PSA has higher AUM but relatively close and the yield is higher… drawback is higher MER 0.17 vs 0.11 for cash.

I have PSA and had trouble picking one over the other. I think Cash is a newer MMF. I knew of PSA from many years ago. I just went with the higher yield in the end but maybe I should have just gone for the lower MER?

August 23, 2023
8:09 pm
mordko
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suburbs4life said
In essence you are saying CASH is more desirable than PSA due to lower MER, higher volumes?

PSA has higher AUM but relatively close and the yield is higher… drawback is higher MER 0.17 vs 0.11 for cash.

I have PSA and had trouble picking one over the other. I think Cash is a newer MMF. I knew of PSA from many years ago. I just went with the higher yield in the end but maybe I should have just gone for the lower MER?  

Six and two threes. They are very similar. CASH has a little bit more risk due to the type of institutions it has money with. I think CASH has higher net yield but the difference is negligible. Personally, I would pick PSA.

August 24, 2023
4:46 pm
TINAisOver
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suburbs4life said
In essence you are saying CASH is more desirable than PSA due to lower MER, higher volumes?

PSA has higher AUM but relatively close and the yield is higher… drawback is higher MER 0.17 vs 0.11 for cash.

I have PSA and had trouble picking one over the other. I think Cash is a newer MMF. I knew of PSA from many years ago. I just went with the higher yield in the end but maybe I should have just gone for the lower MER?  

To be honest I did not have PSA in my MM ETFs watch list and I may have just looked at the MER, trade vol., other pros and made my decision. After reviewing , I would call this a coin flip. AUM is important more to the fund managers than it is me. I don't want to see too little assets under management as this may cause fund dissolution, high spreads, or low trade volume .

This is perfect instance why I use this website. Although I am a newbie member to the forum, I 've often frequented this site for about a decade. It's added a significant value to my financial knowledge and success. I have added PSA to my watch list and expect it will soon be in my portfolio. Reviewing the PSA charts, I see a higher than average price volatility inter day. That is opportunity to increase my returns. Thanks, suburbs4life, for bringing it to my attention.

For me , why pick one over the other, use them all, as long as you are not over stretched. The dividend payouts are only part of their (MM ETF's) usage and value. I also don't just passively let them sit in my holding account waiting for a stock opportunity. I actively, on a daily basis, submit buy and sell orders for a few cents out of the market price spread, often succeeding to have them get filled. This is why want to hold more than one MM ETF at one time. it increases my chances of order fills.
Trading fees makes this investing strategy fruitless. So in addition to having an Itrade account , I also have an NBDB account; a zero trading fees brokerage, where I trade these ETF's at no cost.

I thought I would throw this out there . It's definitely not a get rich scheme , but no one is going to lose their shirt, let alone a dime. If I were to pick a con - you do need a good wad of cash to make it worth while.

TINAisOver

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August 24, 2023
5:44 pm
suburbs4life
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Thanks for your responses, Mordko and TINA.

August 24, 2023
7:20 pm
AltaRed
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I have not been looking at the Cash ETFs closely enough to support the thesis that market prices can vary enough from NAV intra-day to actually make money...given the 1 cent bid/ask spreads. Most of the time, NAV (and market price) simply creeps up slowly post ex-distribution date as interest accumulates to the next ex-distribution date. PSA, for example, starts at $50 ex-distribution date and climbs to ~$50.20 before paying out its distribution and the cycle starts again.

What I see as being of more potential interest is selling PSA the day before ex-distribution date to get the ~20 cents as a capital gain, and taxed accordingly. It is worth twice as much After Tax in a non-registered account as is the interest distribution. Just take a look at a 3 month chart of PSA to demonstrate the effect.

P.S. ETFs of any type do not issue dividends. They issue distributions. Only individual securities can issue true dividends.

August 24, 2023
8:17 pm
mordko
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TINAisOver said

To be honest I did not have PSA in my MM ETFs watch list and I may have just looked at the MER, trade vol., other pros and made my decision….

I have added PSA to my watch list and expect it will soon be in my portfolio. Reviewing the PSA charts, I see a higher than average price volatility inter day.  

Money Market funds typically invest in short term debt. PSA and HISA ETFs in general are different; they mostly put your money into cash accounts. There is no volatility at all: just interest being accumulated and paid out. You can certainly try to bid 99 cents for a $1 coin but I would be very much surprised if you were to get many takers. Your strategy will end up in you losing money on the spread.

August 24, 2023
9:31 pm
TINAisOver
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I stand by my trading strategy in post 33. its not a thesis , it's in fact a practice. I been placing these trades since the beginning of the year when the dividends began to increase. Several times a month there are days the price moves 3-6 cents up side or down side in a trading day where I have my orders positioned. Those price moves can be viewed in the short interval, 15min-1hr charts. Any given month I often match the monthly dividend amount in capital gains. Totally agree AltaRed on the value of capital gains and another reason why I do this.

Mordko , anytime someone wants to give me a $1 for .99 I will take it , and I don't ask why. Preferably multiply it by a 100,000. Just because its a volume game.

Trader first, Saver second

August 25, 2023
5:22 am
mordko
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Again, you confused HISA ETFs with money market funds. No chance at all of PSA moving 3-6 cents off NAV.

A far simpler way to translate interest into capital gains is to use HSAV. This HISA ETF provides an exception from the common rule because Horizon no longer issues HSAV units, It trades like a closed fund, above NAV.

August 25, 2023
8:44 am
FMC
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TINAisOver said

To be honest I did not have PSA in my MM ETFs watch list and I may have just looked at the MER, trade vol., other pros and made my decision. After reviewing , I would call this a coin flip. AUM is important more to the fund managers than it is me. I don't want to see too little assets under management as this may cause fund dissolution, high spreads, or low trade volume .

This is perfect instance why I use this website. Although I am a newbie member to the forum, I 've often frequented this site for about a decade. It's added a significant value to my financial knowledge and success. I have added PSA to my watch list and expect it will soon be in my portfolio. Reviewing the PSA charts, I see a higher than average price volatility inter day. That is opportunity to increase my returns. Thanks, suburbs4life, for bringing it to my attention.

For me , why pick one over the other, use them all, as long as you are not over stretched. The dividend payouts are only part of their (MM ETF's) usage and value. I also don't just passively let them sit in my holding account waiting for a stock opportunity. I actively, on a daily basis, submit buy and sell orders for a few cents out of the market price spread, often succeeding to have them get filled. This is why want to hold more than one MM ETF at one time. it increases my chances of order fills.
Trading fees makes this investing strategy fruitless. So in addition to having an Itrade account , I also have an NBDB account; a zero trading fees brokerage, where I trade these ETF's at no cost.

I thought I would throw this out there . It's definitely not a get rich scheme , but no one is going to lose their shirt, let alone a dime. If I were to pick a con - you do need a good wad of cash to make it worth while.

TINAisOver  

Thanks for this. Food for thought.

August 25, 2023
9:40 am
AltaRed
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mordko said
Again, you confused HISA ETFs with money market funds. No chance at all of PSA moving 3-6 cents off NAV.  

I have not placed PSA in my trading platform nor monitored it on a day to day basis, so I cannot actually see whether this is true or not. One can also look at TSX Money at the end of each day to see trading range. I may purposely follow it for a week to see what the range might be.

For today as of 9:38am PDT, PSA has ranged from $50.21-$50.23 opening at $50.21. It probably will close at either $50.20 or $50.21.

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