Cashless brokerage Accounts are a way for partners to seamlessly move cash between customer brokerage Accounts and their originating banking sources without requiring customers the step of depositing and withdrawing money.
Partners are eligible to use this functionality if they or their third party provider (e.g. banking-as-a-service platform) have the ability to custody and control customer cash. Partners should also be able to put temporary holds and apply journals to such cash.
The cashless Account functionality must be enabled by DriveWealth for your partner environment, which will allow for the workflows seen on this page.
## Cashless workflow
The customer experience for a new customer investing in an asset starts with Order creation. There is no first step to fund the account by following a [Deposit](🔗) workflow.
This means a customer can place any size Order, regardless of their Account having no value at DriveWealth. Whether that Order is accepted is controlled by you, and dependent on the amount of cash you already custody for that customer.
This also means the customer never sees a "brokerage balance" or "investing balance"—hence the label of Cashless. Purchase orders use funds directly from a customer's linked banking system, and sale orders (or other cash events like dividends) return funds directly to that same banking balance.
It is **extremely important** to create additional validation on all sized orders. Partners who utilize Cashless Accounts understand that all orders—no matter the size—will be executed without buying power checks on the individual customer’s brokerage Account.
If DriveWealth receives an Order for a buy a million dollars worth of stock, that Order will be accepted, because it is assumed that the partner validated the customer had the funds to pay for the securities first.
As purchase orders are placed, partners should be able to move funds into an omnibus settlement account on their banking system to settle with DriveWealth on settlement day T+2. It's common for this account to be titled "For Benefit Of" your customers or "Exclusive Benefit Of" your customers.
About temporary holds
Holds are **very** important because they ensure customers do not double spend funds allocated for a purchase of a security. It is **recommended**—but not required—that when checking the spending power of a customer’s cash, you also calculate an amount that is a little higher than the purchase amount, especially on market orders.
Marcus has $100.00 dollars in his bank account at Acme Bank; so he decides to place a **market order to buy 1 share of ABCD**(quantity order) which is currently valued at $100.00. Marcus' order should be **denied** before being submitted to DriveWealth because a market order doesn’t guarantee price, so his order purchase price could be more than $100.00 and he doesn’t have enough money to cover the overage.
After Marcus receives a “not enough funds” message for his initial order, instead of a **quantity** order; he places **a specific amount of cash order** for $95.00 for ABCD. This type of order will guarantee he will only spend that amount.
Before the order is submitted to DriveWealth, Acme Bank will place a hold on his account for the $95.00. Once the order is executed and Acme Bank receives a confirmation of the order being filled for $95.00; Acme Bank will ledger those funds from Marcus’s bank account to an omnibus settlement account; to settle with DriveWealth on **Trade Day + 2 (T+2).**
Partners and subsequently customers will receive funds back automatically after the result of a sale of a securities on its settlement day. Each day, DriveWealth in aggregate will send back to the partner all sale amount minus any offsetting actions (i.e: sale - purchase). These amounts are aggregated across all Accounts.
John, Justin, Marcus and Garrett all make a sell order each to sell $50.00 dollars of AAPL, which they all currently own. Marcus then on T+1 buys $25.00 of AMZN, and Garrett on T buys $45.00 dollars TSLA.
Behind the scenes, after the confirmation of their sales, Acme Bank gave them all spending power of $50.00 each. Marcus then used his spending power to buy his AMZN and Garrett used his spending power to buy TSLA.
On settlement day T+2, Acme Bank will receive a wire from DriveWealth in the amount of $130.00.
So what happened:
John only sold: **+$50.00** | Justin only sold: **+$50.00 **
Marcus sold then purchased within the settlement cycle of **T+2** so he only has credit of: **+$25.00**
Garrett sold then purchased within the settlement cycle of **T+2** so he only has credit of: **+$5.00**
**Total Due to Acme Bank: $130.00**
Each day, when DriveWealth and a partner settle against each other, the Accounts will automatically receive journals to indicate deposits and withdrawals. For example, a customer who purchased an equity on Wednesday will first see a purchase Transaction journaled immediately, followed by a deposit transaction journaled on Friday (the equity's settlement day) once the funds physically arrive from the partner.
## Settlement reports
Cashless brokerage accounts summarize reports of all purchases and sale transactions to provide an aggregated cash value that must be moved.
Settlement amounts are not netted
Cashless brokerage is not a net settlement calculation. Net settlement would imply that all purchases and sales are aggregated to a single amount, however, this is not how DriveWealth does its calculation.
Purchase and sales are separated due to regulatory requirements. There will be at max two wires per day: one from DriveWealth for sale transactions and one from the partner for purchases.
To fetch all [settlement reports](🔗):
And to get the [details of the report](🔗):