1.1 Basic Terms

This topic describes about various terms used in connection with trading.

You need to understand a few terms in connection with trading on units clearly before you use the FCIS system to automate the same.

Table 1-1 Trading Terms and Descriptions

Trading Terms	Descriptions
Trading Box	The trading box refers to the number of units that are available at any given point of time for the AMC, to do trading. The units in the trading box could be the result of any (or both) of two transactional sources: Units arising due to the trading done by the AMC itself Units arising due to inflow and outflow resulting from investors’ transactions in the fund. A trading box, therefore, has no physical existence as an actual entity, but is a term used to identify the pool of trading units held by the AMC and available for trading at any given point of time. Any transaction that results in an increment in the number of units in the trading box may be considered as an in transaction, and any transaction that results in depletion in the number of units in the trading box may be considered as an out transaction.
Statutory Account	This account is maintained by the AMC according to the regulatory requirements. It is used by the AMC very much like a reserve account where the AMC can “park” a specified percentage of the units held by it. This specified percentage is by no means constant and the AMC can use the units held in this account for trading purposes, and also generate dividend earnings on them. The statutory account is, therefore, a unit holder account in the system where the AMC can station some of the units held in its possession at any given point of time.
Suspense Account	This account is maintained by the AMC to differentiate its own holdings from the units arising due to inflows or outflows from investor transactions. One of the reasons for this differentiation is to facilitate the generation of dividend earnings for the AMC on its holdings. The suspense account is, therefore, a unit holder account in the system where the AMC actually transfers all its holdings at a given point in time for the purpose of gaining income earnings on them. When a dividend is declared and processed by the AMC, or when an income distribution process is initiated, all its outstanding holdings in a fund must be transferred to the suspense account so that either income distribution earnings or dividend earnings may be availed of by the AMC.