Settlement Date Reporting

There are some regimes that require reporting based on the settlement date rather than the trade date and often a requirement to represent holding quantities using a mix of trade date and settlement dates. For example in Australia, purchasing a position should be reported on the trade date and the selling should be reported on the settlement date. This means that the quantity of positions are calculated differently than simply a count of holdings on trade date. For such regimes, we use the term straddle position to denote this. 

 

Aosphere Memorandum Reference:

The information covering whether to look at trade or settlement dates (or a combination) is usually found in Section A.6 of the aosphere memo. Here is an example from Australia: 

 

Spot contracts to acquire or dispose of shares:

Entry:

Buyer:

If the seller has a “relevant interest” in the shares (which it will have if it is the holder of the shares or if it can exercise/control the exercise of the voting rights attached to the shares or the sale of the shares), the buyer will have a “relevant interest” in those shares upon entry into the spot contract under section 608(8) and, where the disclosure threshold is satisfied, disclosure by the buyer under section 671B(1) is required.

Seller:

Upon settlement the seller will be a bare trustee in respect of the shares until registration when it ceases to be the holder of the shares and consequently ceases to have a “relevant interest” in the shares under section 608(1). Where the disclosure threshold is satisfied, disclosure by the seller is required. 

 

Settlement:

Buyer:

If the buyer made a disclosure upon entry into the spot contract, no further disclosure is required. 

If the buyer did not make a disclosure upon entry into the spot contract, and where the disclosure threshold is satisfied, disclosure by the buyer is required under section 671B(1) on settlement as the buyer becomes the beneficial owner of the shares and has a “relevant interest” under section 608(1). 

Seller:

Upon settlement, the seller will be a bare trustee in respect of the shares until registration when it ceases to be the holder of the shares and consequently ceases to have a “relevant interest” in the shares under section 608(1). Where the disclosure threshold is satisfied, disclosure by the seller is required. 

 

So as we can see the buyer reports based on the trade date and the seller on the settlement date. 

 

QuantityStraddle

We understand that some clients may opt to still report via trade date only, often due to the fact that they cannot readily obtain settlement date data and reconcile this with trade date positions. However, we want to ensure our rules capture this information if it can be supplied.  In order to cater to this, we have created a new input property called `QuantityStraddle`, which if provided will be the data point we use in the rules that we have implemented this for. 

If this new input property is not provided the rule will default to using ‘Quantity’ (the standard trade date quantity) as normal.

`QuantityStraddle` will be the sum of all purchases on trade date  minus any settled sold positions.

In contrast to ‘Quantity’ which would be your purchases minus any sales for that given trade date.

 

Modelling this in the Positions File

Take this example

Day 1:

Buy 100

Sell 50 (Settles in T+2)

 

Quantity will be 50

QuantityStraddle will be 100 as the sale hasn’t been settled

 

Day 3: (Assuming it takes two days to settle)

 

Quantity will be 50

QuantityStraddle will be 50

 

Now the sale has been settled the QuantityStraddle value can be reduced to 50. 

 

Modelling positions for short - selling:

Day 1:
Short Sale of 100 on the market (settles in T+2)

Quantity in the file will be -100
Quantity Straddle will be 0

Day 3: (Assuming it takes two days to settle)

Quantity will be -100
Quantity straddle will be -100

 

QuantityStraddle for Derivative Assets

We have yet to perform a full analysis of quantity straddling for derivative assets. As such, we would suggest for clients to not define `QuantityStraddle` for derivative assets in most cases, or define it to be the same as `Quantity`. If there is a reason for you to define `QuantityStraddle` for derivative assets, we would be happy to discuss this further with you. Please contact your Client Success Manager or get in touch with our support team at support@fundapps.co.

Following the above in the case of derivative options, `QuantityStraddle` will therefore only become relevant on exercise/ maturity of the derivative option, when it converts into the underlying asset. The underlying asset should reflect trade date purchases and settlement date sales as per the way defined by `QuantityStraddle` (i.e. buyer reports based on the trade date and the seller on the settlement date).

 

Modelling positions for Physically Settled Put Option on Equity:

Assuming Put Option on Equity has a Contract Size of 2, where 10 Contracts are traded (relating to 20 underlying shares).


On the Writing of the Option

  • Buyer of Option (Seller of Shares) records an Option with Quantity 10
  • Seller of Option (Buyer of Shares) records an Option with Quantity -10

On Exercise of the Option

  • Buyer of Option (Seller of Shares) records an Equity with Quantity -20, QuantityStraddle 0 (or reduces the Quantity and QuantityStraddle of their holdings by those numbers accordingly)
  • Seller of Option (Buyer of Shares) records an Equity in FundApps with Quantity 20, QuantityStraddle 20

On Settlement of the Shares addressed by the Option

  • Buyer of Option (Seller of Shares) records the reduction in quantity of the Equity with Quantity -20, QuantityStraddle -20
  • Seller of Option (Buyer of Shares) records an Equity with Quantity 20, QuantityStraddle 20 (no change from the point of exercise)

Note: Physically settled call options will work similarly, just on the converse. It is always the seller of shares who has a delay in reflecting the position for `QuantityStraddle`.

 

Which rules include these nuances?

We are  supporting this for the following Major regimes:

  • Australia
  • Hong Kong
  • Singapore
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