Glossary term
Cash Sweep
A cash sweep is an automatic program that moves uninvested cash in a brokerage account into a bank deposit account or another sweep vehicle such as a money market fund.
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Written by: Editorial Team
Updated
What Is a Cash Sweep?
A cash sweep is an automatic program that moves uninvested cash in a brokerage account into a bank deposit account or another sweep vehicle such as a money market fund. Brokerage firms use sweep programs so idle cash does not just sit as an unassigned balance after deposits, sale proceeds, dividends, or interest payments hit the account.
Sweep settings affect yield, liquidity, and the type of protection attached to idle cash. Two accounts can show the same cash balance but place that cash in very different products behind the scenes.
Key Takeaways
- A cash sweep automatically moves uninvested brokerage cash into a designated sweep option.
- Sweep options commonly include bank deposit programs and money market fund programs.
- Different sweep choices can pay different interest rates or yields.
- Protection differs because bank sweeps rely on FDIC insurance at participating banks while money market funds are securities rather than bank deposits.
- Sweep structure affects where your idle cash sits even if you do not place a separate trade.
How a Cash Sweep Works
When cash enters the account and is not immediately used to buy a security, the broker can automatically sweep that money into the account's designated sweep vehicle. In some accounts the sweep happens into a bank deposit program. In others it happens into a money market mutual fund. The movement is usually automatic and built into the account agreement.
Sweep cash can look passive to the investor even though the account is still making an active choice about where that money is held.
Common Cash Sweep Structures
Sweep type | What it generally means |
|---|---|
Money market fund sweep | Idle cash is swept into a low-volatility mutual fund that invests in short-term debt securities |
Bank sweep | Idle cash is swept into deposit accounts at one or more program banks |
No sweep | Cash may remain as a free credit balance at the firm instead of being moved into another product |
Those structures are not interchangeable. They can differ on yield, withdrawal timing, and whether the cash is treated as a bank deposit or a security.
How a Cash Sweep Changes Idle Cash Use
Cash sweep matters because the default treatment of idle cash can materially change what an investor earns while waiting to reinvest, transfer, or withdraw money. A low-yield default sweep can create a silent drag if large balances sit there for long periods. A higher-yield sweep can improve cash management, but it may come with different product disclosures and different protection rules.
That protection question matters too. SEC guidance draws a real distinction between bank sweep programs and money market fund sweep programs. Bank sweeps may offer FDIC coverage through participating banks, while money market sweep balances are not bank deposits and are not covered by FDIC insurance.
Cash Sweep Versus Core Position
A core position is the account's default settlement cash location inside certain brokerage platforms. A cash sweep is the automatic program that moves idle cash into the selected vehicle. In some accounts the sweep vehicle effectively becomes the core position. In others, the core is a money market fund that serves as the settlement hub without a separate bank sweep structure.
The practical issue for investors is not just the label. It is understanding where uninvested cash actually sits and what rules apply to it.
The Bottom Line
A cash sweep is an automatic program that moves uninvested brokerage cash into a bank deposit account or another sweep vehicle such as a money market fund. The sweep choice influences yield, liquidity, and whether idle cash is treated more like a bank deposit or a brokerage security position.