So I sold stock last Thursday. Why does it take 2 business days for a stock to be sold? Where Crypto and E-payments nowadays take real time. Also I need the money to be wire transfer to international bank. Why does this is not also real-time it will take like 4-7 business days before it will be on my bank account. Why does the transfer not working on weekends? So basically why everything is still slow and why everything can’t be done on weekends?
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Financial services are like many other services, they are divided into different classes and serve different customers at different performance levels.
Most retail investors and bank customers are “third class” clients. Cheap services, designed for low value, high volume and limited perks. There is no reason particularly to improve services at high costs for the millions of low value transactions. These customers are paying for this level of service.
Wealthier clients can go to “second class”. Arrange for credit lines with their banks, margin accounts with their brokers and other short term facilities. These come at a cost but allow these kind of customers to enjoy greater access to their funds.
Even wealthier clients can access “first class” services where many more services are available. It costs a lot more but the amounts they can transact in are far higher and these customers are valued by the banks and brokerage.
The question is, can you speak to your bank and obtain credit line facilities? Do you have services of a private wealth manager at your bank and investment broker? The funny thing is to expect higher and better levels of services for free. These organizations are businesses – expect to get what one is willing to pay for.
You don’t expect to go into a discount store and obtain Tiffany level of services and amenities.
Anyway, the technicalities are that US stock trading is T+2 (takes 2 business days). This is governed by the SEC and stock market rules. There are a lot of intermediaries involved (clearing houses, market makers etc) dealing with many millions of daily transactions.
International wire transfers more than a minimum amount go through security checks – the US government has pretty stringent reporting requirements for money transfers and banks have put in the security verifications necessary. The banks are required to know who the money comes from and who the money goes to and to ensure that it isn’t the proceeds of or goes on to fund illegal activities. This all goes on behind the scenes and requires time.
Just to clarify, the sale happened straight away. What takes two days is the clearance: the actual money moving from the buyer to the seller. The buyer may not even have the money yet and has two days to pony it up.
International transfers are kinda similar: the person does the transfer and the bank could add it to your account straight away. But then you could spend it straight away and then the bank is temporarily out of money because it’s still waiting for the money to arrive from the other side of the world.
Note: that can be solved. For example, within the SEPA area transfers are expected to be basically instant (benchmark is <10 seconds IIRC). So a person in Portugal can transfer money to a German account basically instantly. It helps that there is no currency conversion happening, that adds a whole other layer of complexity.
When you pay by credit card, the money is immediately deducted form your card, but it can take days before the merchant gets it.
Depends on legislation or lack thereof, within EU payments are close enough to instant. But outside that you quickly run into quintessential problem of banking, if bank A owes money to bank B, how does bank B know bank A is good for it? When you do a bank transfer no actual money moves, it’s just I.O.U-s changing hands, if you don’t have things cleared beforehand then it takes time an effort to check things and that makes things slow and expensive. Even in EU, I’m sure there is some upper limit to how large transfer are cleared instantly, if someone tries to move billions I don’t think automatic systems are just going to rubberstamp that through.
T+2 is mainly just so that the broker has a chance to pocket any differences in price range before settling. This caused some brokers huge problems back in jan 21 when people were purchasing GME for $5 a share and two days later brokers had to buy those shares for $400 plus
I would also add some pessimism to some of the great answers here- the bank or the market maker wants to float your cash to themselves for as long as possible for their own use. Multiply your transaction x millions of transactions delayed for 10 days- this is liquidity they can use. IMO
There are different regulations on this depending on where you are in the world – so for example, the EU, UK and Australia all have mechanisms in place for TX to occur in under a minute.
However there are still legacy systems in place for other types of transactions. Have a read about ‘clearing houses’. Not all banks perform their own clearing and will offload to a bigger bank, once you start to get into this the transactions can take time as they go through the validation in each phase. Hence the days wait.
I don’t care if it’s slow, but at least it’s irreversible.
Have an unknown and unwanted charge in your credit card? Call the bank and it’s sorted out.
Sent the money to the wrong account number? Call the bank and it’s sorted out.
Someone hacked your bank account and stole some of your funds? Again, call the bank.
How about stolen seedphrase? Oh, did you send your coins to the wrong tx address? Oh did someone hacked the chain and now your coins are worthless? Well, tough luck.
Obviously, there’s still pros to crypto than traditional banking like full control of your finance without government or any authority messing with your stuff.
But repeat that again on your head, **full control and responsibility of your finance. Just you, and only you.**
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