How does the CMA work with non-core positions?
Summary of User’s Concern and Solutions Discussed:
- The user, JMackie, is concerned about whether shares of an ETF will be liquidated if their core position in the Cash Management Account (CMA) is depleted due to debits or transfers.
- Fidelity representatives clarified that only certain securities would be liquidated, and ETFs would not be among them.
- If the core balance is depleted, the system will first look to eligible Fidelity secondary money market funds to cover transactions, and these funds will be automatically liquidated if necessary.
- It was recommended that JMackie sell noncore money markets before expected purchases to avoid any issues with liquidity.
- Additionally, for investments in a standard Individual brokerage account linked to the CMA, the Cash Manager feature can only draw on available cash, available margin, and non-core money market funds.
Here’s the full thread
New to the CMA, and have my core position as SPAXX, but accidentally bought some shares of an ETF in the account as well.
My question is, if my core position is depleted by debits/transfers/etc would the other holdings in my CMA get liquidated to allow the transfers, or should I go ahead and sell those shares so I have everything in my core position?
Hi there, @JMackie. We’re glad you’ve chosen to invest with Fidelity and I’m happy to answer your question.
In short, only certain types of securities would be liquidated. Exchange Traded Funds (ETFs) would not be. To clarify, if the core balance is depleted, the system will then turn to any eligible Fidelity secondary money market fund to cover the transaction. In these cases, the money market fund will automatically be liquidated.
When the core has insufficient funds, the next liquidation level is the noncore taxable money markets (the highest balance first, then the lowest balance), then noncore tax-free money markets (the highest balance first, then the lowest balance). That said, it is best practice to sell noncore money markets before expected purchases.
It’s also important to note that not all noncore money markets are eligible for automatic liquidation; therefore, you can use the requirements below or follow up with the symbol to confirm if a fund is eligible:
• Fidelity Investments Money Market (FIMM), non-FIMM government, retail prime, and retail municipal funds
• Maintains a stable net asset value
• A liquidity fee has not been imposed
I’ll include a couple of resources below if you want to learn more about money markets. Our site has a great article that goes into more detail regarding these types of funds.
What are money market funds?: https://www.fidelity.com/learning-center/investment-products/mutual-funds/what-are-money-market-funds
How Mutual Funds, ETFs and Stocks Trade: https://www.fidelity.com/learning-center/trading-investing/trading/trading-differences-mutual-funds-stocks-etfs
Thanks again for choosing us. Feel free to let us know if there’s anything else we can clarify further! 🟢
OK just to make sure I am understanding correctly. In my case I am currently holding some FITLX in my CMA if my core position is depleted, it would not liquidate that holding? Just want to make sure before I go an make some changes.
You’ve got it, @JMackie! You’re spot on.
Perfect thanks for helping me understand!
One follow up would be if I put investments into my standard Individual brokerage account and link them in Cash Manager to act as overdraft, are there any constraints on what I can have in the brokerage account?
You can invest as you please in your brokerage account but the CMA’s Cash Manager feature can only draw on available cash, available margin, and non-core money market funds in your designated Fidelity funding accounts (up to $99,999.99 per day per funding account). 🟢
Got it, and thanks for walking me through all that!
On behalf of @FidelityLinsey, @FidelityAidan, and @FidelityHeather, you are most welcome @JMackie. Please don’t hesitate to reach out to us at any time. We’re always happy to help! 🟢