📈 Now available: EVEN higher interest on uninvested cash!

[RLX]

@G.G

AUD 4%

Congrats for the new currency.
When it will be available?

Note: Please do not forget to answer my previous post, as I’m dependent on the answer to take decision to invest or not:

Now available: EVEN higher interest on uninvested cash!

There is any place where says the details of the instruments source of the interest for each currency? For example: for currency x its the QMMF ABC (with link for the details in the asset manager site, such as, its domicile) for currency y is a bank term deposit in country DEF (a mention to the bank would be very useful addition to transparency and peace of mind) for currency z is … → The reasons for this, are mainly taxation declaration concerns but also we as investors (and all financial …

[TInvest]

You can lose your capital with this uninvested cash scheme though, can you not?

[frank1]

Trading 212 says my uninvested cash goes to a “qualified money market fund” which is subject to loss.

So at least I should get a financial statement of this money market fund or some idea where the money is invested. Any ideas?

[frank1]

YES! exactly. where is the details of these money market funds??

[frank1]

Exactly! there’s no way to do any DD on these funds. No information at all.

[libreus]

It would be greatly appreciated if this statement could be incorporated into the agreement as well.

[Aul]

Can someone update me on how i can be parts of this opportunity investment. i will really appreciate .

[G.G]

@RLX

There is any place where says the details of the instruments source of the interest for each currency?

@frank1

some idea where the money is invested. Any ideas?

We use a mixture of different vehicles per currency: we can hold your uninvested cash with banks (in regular bank deposits or time deposits) and/or in QMMFs.

We are currently making use of term deposits and regular deposits only. When we make use of QMMFs, we will share this on the website and in the client statements.

@TInvest

You can lose your capital with this uninvested cash scheme though, can you not?

We use a mixture of different vehicles: we can hold your uninvested cash with banks (in regular bank deposits or term deposits up to 95 days) and/or in QMMFs.

Theoretically, a QMMF can lose a part of its value, e.g. it can drop in value by 1%, however, we carefully select all QMMFs to ensure that they maintain a low-risk strategy.

@libreus

It would be greatly appreciated if this statement could be incorporated into the agreement as well.

We will pass this to the legal team for review. Thanks 🙏

[SpOOny]

Is the protection of 20 000 Euro on this too or is it only on stocks?

[RLX]

Thanks for the answer.
I was talking about something like Wise has done in their page about their MMFs in uninvested cash scheme with web page links to used MMFs. Similar could be done with mentions to bank names used for each currency (e.g. currency XYZ in bank A in country Z).

Wise isn’t only one that show the details of their interest program, all the brokers with this kind of scheme show their details. So far, T212 is the only one that is less transparent. Every broker had choose their own MMFs and banks, with different MMFs and its issuers/managers.

GBP

USD

EUR

Meet Wise Interest.

[radish.chopsticks]

In some brokers, the customers are just holding their money in their broker accounts, but in fact they are buying and selling money market funds in the background when they buy or sell financial instruments, and the paid “interest” is in fact dividends paid by the money market funds.

(Again I fully recognize this may vary by jurisdiction, but I’m eager to understand this even if it might not apply everywhere. Thanks for bearing with me.)

But here we aren’t receiving market value from whatever underlying instruments/funds: we’re receiving a published interest rate set by Trading 212. It can change, yes, but it’s not directly tied to market movements. In fact, we have no idea how much money T212 is actually making (or losing) on this, and it isn’t relevant: they said they’d pay us 4% (etc.) and they do. This is in contrast to e. g. Wise Interest, which has been quoted above and which, as far as I understand it, says your money goes directly into a fund and you get back whatever the fund happens to give back, with no rates listed until after the fact.

Like, if you put your money in a term deposit at a bank, it isn’t physically just sitting there doing nothing, is it? The bank uses it to earn money to pay for the interest they owe you, somehow. The bank might earn more or less or even go into the red, but it’s promised to pay you interest and that’s what it does. I don’t see how this is significantly different. Whatever T212 are telling us of their underlying assets is basically to let us assess the potential hassle/expediency of recovering the money if those underlying funds suddenly go bust, and ironically they might be regretting now that they ever told us anything. No?

[RLX]

@radish.chopsticks

But here we aren’t receiving market value from whatever underlying instruments/funds: we’re receiving a published interest rate set by Trading 212. It can change, yes, but it’s not directly tied to market movements.

Are you sure of that?
I’m not. As I don’t know what is under the hood.

But in T212 platform’s “Interest on cash” dashboard it states the following in the “Interest rate risk”:

Disclosure Notice page 22:

https://www.trading212.com/legal-documentation/uk/common/Disclosure-Notice_EN.pdf

Bottom-line: There is market risk as value of debt instruments are affected by Central Banks monetary policy decisions. The most common example are bonds and bills/commercial paper. The higher duration, means higher sensitivity to interest rate movements and their market value are higher impacted.

@radish.chopsticks

In fact, we have no idea how much money T212 is actually making (or losing) on this, and it isn’t relevant: they said they’d pay us 4% (etc.) and they do. This is in contrast to e. g. Wise Interest, which has been quoted above and which, as far as I understand it, says your money goes directly into a fund and you get back whatever the fund happens to give back, with no rates listed until after the fact.

Guess what, its the normal way a QMMF works. And T212 mention the use of those kind of instruments.

@radish.chopsticks

Like, if you put your money in a term deposit at a bank, it isn’t physically just sitting there doing nothing, is it? The bank uses it to earn money to pay for the interest they owe you, somehow. The bank might earn more or less or even go into the red, but it’s promised to pay you interest and that’s what it does. I don’t see how this is significantly different.

The bank deposits are the simple and cheapest form of financing that banks have (after Central Bank lending). The commercial banking activity is a form of interest rate arbitrage, they earn the difference between the passive interest rates (e.g. deposits) and the active interest rates (e.g. loans given), besides commissions/fees.

Banks can default in all or partly their deposits and/or interest payments, as deposits are in reality simple loans given by the bank customers to banks. There are “recent” examples (XXIst century).

There are several differences between QMMFs and bank deposits. More important will be:

• In EU countries, there is a protection of 100k EUR/customer for each bank account. For securities, like QMMFs, there is 90% protection and up 20k EUR/customer. Some EU countries can have higher protection schemes.
• For tax statements, some local authorities demand the specification of the kind of income vehicle and their source (country).

For me when something is too good to be true, it’s most probably not true. The lack of transparency is a major red flag for me. This KYB/KYS approach had already save me from some bullets.

For example, Plum, Vivid, Wise, Lightyear, Revolut, Trade Republic, etc, give details of their interest program, the MMFs and/or banks used.

EDIT:
KYB = Know Your Business
KYS = Know Your Supplier

[TInvest]

Who carries the downside if that loss occurs? Is it me the customer, or T212?

Same question if there is an upside.

[radish.chopsticks]

Are you sure of that?
I’m not. As I don’t know what is under the hood.

My take is precisely that it doesn’t matter what is under the hood. My contract is with T212, who gives me a fixed rate of interest.

Kind of like when I invest in an Ireland-based ETF that tracks S&P 500, I’m not (for legal purposes) investing in any American papers. The fund is, under the hood (and the price and dividends reflect this). But the stock I own is Irish (and when the dividends reach me, they’re taxed as Irish; and if I die, US estate tax doesn’t apply). Similarly here, I’m not investing in QMMFs. T212 is (or isn’t, as happens to be the case so far). I just get interest.

[HuskyDogg]

It’s important to know the actual money market funds the money is invested in for the following reasons:

1. So we can assess the credit risk of the fund
2. Speaking for euros , T212 offers higher rate than the €STR (euro short term rate) that banks use to lend to each other. Where is the extra return coming from? Most certainly from higher credit risk.

Transparency is very important. I don’t get why some people say it doesn’t matter. Of course it does.

[G.G]

@RLX @HuskyDogg Rest assured that we will announce the details publicly once we make use of QMMFs.

Interest rates are based on rates we receive from the banks and QMMFs we hold your cash with. These rates are based on the central banks’ rates, like the Bank of England’s base rate. At the time we are only making use of term deposits and normal deposits at major banks such as JP Morgan and Barclays, and that’s where currently the return is coming from.

@TInvest @SpOOny

Where we hold your money with a bank, clients of Trading 212 UK Ltd. are protected by the FSCS up to a limit of £85,000. Clients of Trading 212 Markets Ltd. are protected by the ICF up to a limit of €20,000 and are additionally insured up to €1M by Lloyd’s of London. Learn more about how your money is protected on our website.

Where we hold your money with a QMMF, if Trading 212 fails, the FSCS or ICF will serve as a compensation fund of last resort. In the unlikely event that the QMMF fails to maintain their low-risk strategy, as with any investment, the protection will not be available. We carefully select all QMMFs to ensure that they are highly liquid, stable in value and maintain their highly regulated status.

[TInvest]

My conclusion here, trying to put this in simple terms, is that:

• if the QMMFs return less than 5% (let’s use GBP as an example), then the customer takes the downside
• if the QMMFs return more than 5%, T212 takes the upside

Is that right?

[RLX]

@G.G

At the time we are only making use of term deposits and normal deposits at major banks such as JP Morgan and Barclays, and that’s where currently the return is coming from.

Thanks for extra clarification!

In T212 UK “Bank Transfers” details, there are some banks mentioned, all related to JPMorgan Chase Bank, are those banks and their country subsidiaries used in the T212 bank deposits interest scheme? Can you please confirm it? And which currency have the Barclays bank and which country it’s headquartered?

EUR - J.P. Morgan SE - Germany

HUF - JPMorgan Chase Bank - UK
CZK - JPMorgan Chase Bank - UK
PLN - JPMorgan Chase Bank - UK
USD - JPMorgan Chase Bank - UK
GBP - JPMorgan Chase Bank - UK
RON - JPMorgan Chase Bank - UK
CAD - JPMorgan Chase Bank - UK
NOK - JPMorgan Chase Bank - UK
SEK - JPMorgan Chase Bank - UK
BGN - JPMorgan Chase Bank - UK
DKK - JPMorgan Chase Bank - UK
CHF - JPMorgan Chase Bank - UK

The full disclosure is good for all, including customers and T212. I would imagine the clickbait nay-sayers “influencers” take advantage of the missing details to provoke FUD in T212. The lack of transparency can inflict reputational risk to any business. The third-parties can do more harm in the marketing than the company’s marketing can do good.

In the end, less traction in attracting more AUM and new customers.
I avoid investing in businesses and financial instruments when I don’t properly understand them. And as such, I’m out of T212 Interest on Uninvested Cash, until I have all the details, probably the position of many customers, including the silent ones that don’t publicly voice their concerns.

[radish.chopsticks]

No arguing there. Knowing the sources can be good for assessing risks such as insolvency upstream, continued withdrawal ability, and potential rate changes in the future, not to mention simple trust between the client and the service provider. Only for tax purposes, I fail to see how this is anything other than interest.

I treat my Revolut Saving Vaults the same, by the way. (I’m not eligible for Wise Assets.) They tell me what funds they use, and the rates come from those funds, but I never log any buys or sells on those funds; I don’t even know when exactly they happen. The income I get is filed as interest. How could it be dividends if I never even bought anything? Plus, it’s calculated to a sub-penny/cent precision and accumulated daily; stock dividends don’t do that.

Maybe the key is in the words “cash equivalent”. I don’t think such a term exists in my tax jurisdiction, and whatever cash I hold in an account, whether in a bank or at T212, is just cash. If I get paid for letting someone hold my cash, that’s interest. Perhaps this is different in jurisdictions that do make a distinction for “cash equivalent”.

[RLX]

@radish.chopsticks

Only for tax purposes, I fail to see how this is anything other than interest.

In the case of “interest” with origin from QMMFs, it is classified as dividends from funds in most European countries and not interest from bank deposits. Also local tax authorities use that financial understanding.

Maybe in UK it’s indifferent the source and the type of income (interest or dividend).

T212 asks for our permission to allow them to invest in QMMF, without that they can’t invest our money in MMFs. T212 is investing our money for us. Meaning that it’s different from lending our money to T212 and them they invest in what they want to, and for that they would pay us interest income, similar to what banks do with deposits.