TSP board to limit interfund transfers

[gphill]

MORE info on Fred Smith .gov
Hum, seems when you have a gold mine, you get shaft and all!
And now, the games began!
gphill

 

[ou81200]

They talk about 3000 participants who are "day traders". How many participants does anybody think make more than 2 trades a month? This will affect more than just people who frequent TSP TALK.

I had another retirement plan (457 plan) that imposed the same restrictions. They faulted their foreign funds as the reason for the restrictions. As a result, they would impose a 90 day restriction on Foreign fund transfers after making two transfers within the same period.

My guess is the cost of making I fund transfers.

But the numbers they crunched just does'nt make any sense. How can 3000 participants make that big of an impact with the amount of money TSP has in their accounts???

 

[Birchtree]

Gee, I've been waiting for the I fund to drop since it was trading at $25.84 back on 10/12 into the $24.00 range. It did hit a peak at $26.02 on 10/29 - no I take that back the peak was at $26.31 on 10/31. So I've waited and finally placed a DCA IFT for the I fund COB 11/20. Suits me just fine. Now which ever way it goes I'll DCA some more.

 

[TRAFFIC_DOG]

Your TSP account was designed as a fiduciary account. That means the many need to be protected from their own undoing. Making only two trades a month is plenty to make extra money - there is plenty of time to trade over a 12 month period.

Save it......
You don't have a dog in this fight.

 

[robo]

You are waging a battle you can not win. They have the SEC on their side and they are following guidelines from:
http://www.sec.gov/rules/final/33-8408.pdf

I will be moving to a Vanguard brokerage account when I retire. The main reason is I hate the TSP deadline. I'll pay my 12.00 a move. ( 12.00 a trade if you have over 100k ) I think it's 8.00 if you have 500K, but not sure. I like Vangaurd for my TSP money and will leave my Roth money in Scottrade.

 

[Fivetears]

How much will Mr. Losey receive as a result of our exclusive input?
Vulture. :suspicious:

 

[Fivetears]

Thanks ass.

 

[easting]

Thanks ass.

Where'd that come from?

 

[Show-me]

Hey don't kill the messenger, Mr. Losey. He is trying to get some folks to give our side and maybe we need to do that. Use the press to fight the TSP board.

I like the idea of charging a small, reasonable fee for trades in excess of what ever. Maybe that is what they wanted all along.

As of right now I will be changing my contributions down to the 5% for the match and dumping more into my Scottrade accounts. Screw them for screwing me.

 

[Rob]

Show-Me just posted what I was going to post as I started reading through this thread.

First of all, it is a horrible thing for the government to limit our money-making abilities, especially when it comes to retirement. Perhaps they feel they might be able to squeeze out a few more years of service from us since the large majority of TSP folks are going to dump their accounts into the G or F fund (I'm headed towards the F fund myself).

Yes, I just lowered my contribution down to the 5% minimum to get the maximum government contribution and plan to take the remaining balance of what I had been putting into TSP and see what I can do myself with playing the market or just dumping it into a Roth IRA.

This is really disappointing news...really disappointing.

 

[$$lake]

New article …. http://www.fedsmith.com/articles/articles.showarticle.db.php?intArticleID=1428

Day Traders Taking Bite From TSP Returns


By Ralph Smith
11/19/2007
FedSmith recently ran a survey to gauge reader reaction to the possibility of the Thrift Savings Plan imposing a limit on the number of trades that participants could make or imposing a fee for TSP participants who trade frequently.
The TSP has studied transaction costs and day trading recently and come up with some interesting statistics. As a result of its findings, there is an internal recommendation to begin imposing limits on the number of TSP trades each month.
Here is a quick summary of the data. In 2004, trading costs for the TSP were $2.2 million. In 2005, the costs jumped up to $6.7 million. In 2006, trading costs continued their upward spiral and hit $15 million. These fees and their percentage increases over the previous year are illustrated in the table below.

Year

Fees
% Increase
2004
$2,200,000
-
2005
$6,700,000
204.55%
2006
$15,000,000
123.88%​

​

The biggest expenses in 2006 resulted from trades in the I fund. Expenses for this fund came to $13.8 million out of the total costs of $15 million.
Trading I fund shares has become more frequent. In September and October, the average I fund daily trading totaled $224 million. That compares to an average of $49 million in daily I fund trades in 2006. According to the TSP study, most of these costs came from frequent traders. In other words, TSP participants who bought or sold shares in the I fund completed a "round trip" of trades within 60 days. In effect, there are about 3000 TSP participants who trade their funds frequently and are accounting for much of the TSP's total trading costs. Part of the costs created by frequent trading is due to the loss of interest that occurs because of delayed settlements. This interest loss has been approximately $1.2 million so far in 2007--in addition to the higher expenses being paid.
It is not only the I fund that has experienced the surge in day trading. It has impacted other funds as well. Here is a chart that shows the dollar amount traded in funds through October 2007 and the dollar amount for these funds in all of 2006:

Impact of Frequent Trading on TSP Funds

Fund
Total $ Amt. Traded (2006)
Total $ Amt. Traded (2007 YTD)
% of Fund (2006)
% of Fund (2007 YTD)
F
$2,389,469,901
$8,006,268,543
23%
69%
C
$7,954,559,207
$9,214,817,528
11%
11%
S
$6,086,286,346
$11,257,570,924
39%
60%
I
$12,306,580,227
$23,467,413,406
72%
88%​

​

The trading costs of TSP funds are also going up considerably for other TSP funds. Ultimately, these costs impact the returns of the funds that are realized by all TSP participants. Most private sector funds have implemented some type of restrictions on trading, especially in international stock funds similar to the I fund. These restrictions vary from charging additional fees to imposing a limit on the number of trades in a specified time period.
In order to cut down on these costs, an internal recommendation has been made to limit the number of TSP transactions that can be made. Under this proposal, an investor would be restricted to two interfund transfers per calendar month. After these two trades, participants would still be able to move more money into the safety offered by the G fund.
The rationale is that two interfund transfers would be enough to allow TSP participants to relance their portfolios every other week and make a total of 24 trades per year. This restriction would effectively eliminate the day trading or frequent trading of the fairly small number of investors who have been increasing their trading activity. The restrictions could be imposed in March or April of 2008.
The restrictions are only a proposal at this time but it is likely that restrictions such as these are going to be implemented. In the meantime, there is also a recommendation to try and slow down the frequent trading in the I, S and F funds. The TSP organization is going to consider mailing a letter to the several thousand people who are frequent traders and urging them to refrain from frequent trading or face being restricted to requesting interfund transfers through the Postal Service until new, automated curbs take effect.
http://www.fedsmith.com/articles/articles.showarticle.db.php?intArticleID=1428

 

[Talltimber]

Anyone go to the weekly board meetings? That might be a good place to send some representation, every week...

 

[Talltimber]

Originally Posted by Birchtree
Your TSP account was designed as a fiduciary account. That means the many need to be protected from their own undoing. Making only two trades a month is plenty to make extra money - there is plenty of time to trade over a 12 month period.

Extra money!? You have extra money? Wow.

 

[Cortez]

well..I was planning on maxing out a loan and dumping it into selling s&p options anyway...3.5% a month the past 6 months, and don't worry about it every day. Thank you TSP board

I have been seriously considering selling credit spreads using TSP funds. What are the conditions to get a TSP loan?

 

[Miss_Piggy]

Are we under attack? Have we been infiltrated?
I don't think enough of the "right" people got enough of our losses in the last couple of weeks.

 

[Show-me]

I have been seriously considering selling credit spreads using TSP funds. What are the conditions to get a TSP loan?

It is done on-line, $50 fee, up to $10k personal loan depending on account balance of course.

Off topic, bad Moderator!

 

[James48843]

Here is the full link to read the fedsmith article:

http://www.fedsmith.com/articles/articles.showarticle.db.php?intArticleID=1428

 

[James48843]

And here is the link to the report from the Board:

http://www.fedsmith.com/articles/references/FrequentTrading.pdf

Read it.

I'm going to try and put both the article and the Board paper on a sticky note here in this thread.

 

[fedgolfer]

what a bunch of idiots. Vanguard doesn't let you buy back into the fund for 60 days, but then you have 60 other funds to chose from. Most large investment firms do... you can just hop from money market to mutual fund w/out waiting for trade settlement. That's an awful point of comparison!

 

[fabijo]

And here is the link to the report from the Board:

http://www.fedsmith.com/articles/references/FrequentTrading.pdf

Read it.

I'm going to try and put both the article and the Board paper on a sticky note here in this thread.

Thanks for the info, James. It looks like the recommendation to trade twice a month is something they are prepared to do until they find another solution. I'll be watching out for this. This is really going to hurt the premium services here, huh?