Fidelity’s NFS launches bank sweep program for brokers

National Financial Services LLC, the correspondent-clearing unit of Fidelity Investments, has set up a sweep program that allows broker-dealers to deposit up to $2 million of their customers' cash into insured bank accounts.

National Financial Services LLC, the correspondent-clearing unit of Fidelity Investments, has set up a sweep program that allows broker-dealers to deposit up to $2 million of their customers’ cash into insured bank accounts.
Brokers have long promoted bank sweep programs as a way for their clients to earn interest on idle cash sitting in their brokerage accounts on a daily basis. NFS facilitated such programs in 2005 for its broker-dealer customers, but the cash was swept into single banks picked by each broker-dealer — meaning that the deposits were insured only up to the Federal Deposit Insurance Corp.’s single-account limit (currently $250,000).
NFS has contracted with eight banks nationwide so that each brokerage customer in the program can have multiple interest-bearing accounts, each with full FDIC coverage.
Many brokerage firms have long had such programs, but the Fidelity arrangement is particularly beneficial at a time when investors who are fearful of volatile markets are sitting on historically high levels of cash, NFS senior vice president Bob Leonhardt said in a prepared statement.
As in sweep programs offered by large brokerage firms such as Merrill Lynch & Co. Inc., broker-dealers in the program will be able to offer clients six different interest rates, tiered to the balances in their brokerage sweep accounts.
Clients who use multiple banks will receive a single consolidated statement and tax report. Cash in the accounts can be accessed to cover securities purchases, as well as check and debit card transactions in clients’ brokerage accounts.
Commonwealth Financial Network, a brokerage firm for independent registered representatives, has joined the program, NFS said.
The banks in the program are Boston Private Bank and Trust Co., Capital One Bank USA NA, Manufacturers and Traders Trust Co., Marshall & Ilsley Bank, New York Community Bank, Trustmark National Bank, Union Bank NA and Zions Bank, a Fidelity spokesman said.