1.2 Trading Transactions

This topic provides explanation on trading transactions of the AMC.

During the course of trading on holdings, the AMC may do any or all of the following transactions:

1. Creation
2. Liquidation
3. Management Transfer transactions
   1. Management Transfer Out to Statutory Account (MTOST)
   2. Management Transfer Out to Suspense Account (MTOSU)
   3. Management Transfer In from Statutory Account (MTIST)
   4. Management Transfer In from Suspense Account (MTISU)
4. Net Settlement
   1. Net Settlement In (NSI) transactions
   2. Net Settlement Out (NSO) transactions

Note:

Global Order transactions can also be entered by an AMC. The system also services these transactions. However, the global order feature is only available if you installation has specifically requested for it. An exhaustive note on global order transactions may be found in the Annexure. This chapter only discusses the transaction types mentioned above. Trading box functionality is applicable only for Daily priced funds.

Creation

Creation of units by the AMC is a result of a management decision to buy a certain amount of units from the trustees. The units that are bought are either sold to the unit holders at a more favourable price to generate profit, or kept in the suspense account, or both.

Creation of units by the AMC is a typical activity when it is desirous of generating earnings on favourable movement of fund prices.

A creation transaction will have the effect of incrementing the number of units in the trading box, and is considered an in transaction.

Liquidation

Liquidation of units by the AMC is a result of a management decision to sell part of its holdings to the trustee, and may occur for any of two reasons:

• To minimize losses on its holdings due to unfavourable movement of fund prices.
• To generate earnings out of an abundance of units in the trading box and a favourable price for liquidation.

A liquidation transaction will have the effect of depleting the number of units in the trading box, and is considered an out transaction.

Management Transfer transactions

Any movement of units from or to the statutory account or suspense account, due to management trading decisions, from the trading box, will result in any of the following transactions, as applicable:

• Management Transfer out to Statutory Account (MTOST)
• Management Transfer out to Suspense Account (MTOSU)
• Management Transfer in from Statutory Account (MTIST)
• Management Transfer in from Suspense Account (MTISU)

For more details on components of Management Transfer transactions, refer to the Movement of Units table.

Table 1-2 Movement of Units

Movement of Units	Descriptions
Management Transfer out to Statutory Account (MTOST)	This activity is a result of a management decision to transfer part of the AMC’s holdings from the trading box to the statutory account. The MTOST transaction has the effect of depleting the number of units in the trading box, and is considered an out transaction.
Management Transfer out to Suspense Account (MTOSU)	This activity is a result of a management decision to transfer part of the AMC’s holdings from the trading box to the suspense account. The MTOSU transaction has the effect of depleting the number of units in the trading box, and is considered an out transaction.
Management Transfer in from Statutory Account (MTIST)	This activity is a result of a management decision to transfer part of the AMC’s holdings from the statutory account to the trading box. The MTIST transaction has the effect of incrementing the number of units in the trading box, and is considered an in transaction.
Management Transfer in from Suspense Account (MTISU)	This activity is a result of a management decision to transfer part of the AMC’s holdings from the suspense account to the trading box. The MTISU transaction has the effect of incrementing the number of units in the trading box, and is considered an in transaction.

Net Settlement

The net number of units that are settled due to the different transactions that occur on a business day is referred to as the Net Settlement for the day. This consists of the following two components:

• Net Settlement In or NSI
• Net Settlement Out or NSO

For more details on components of Net Settlement, refer to the Net Settlement table.

Table 1-3 Net Settlement

Net Settlement	Descriptions
Net Settlement In or NSI	The net number of units flowing into the trading box due to redemption, switch-out, amended switch-in and amended subscription (or initial public offering) transactions. This is called the Net Settlement In or NSI. The NSI transaction has the effect of incrementing the number of units in the trading box, and is considered an in transaction.
Net Settlement Out or NSO	The net number of units flowing out to the trading box due to subscription, initial public offering, switch-in, reinvestment, amended switch-out and amended redemption transactions. This is called the Net Settlement Out or NSO. The NSO transaction has the effect of depleting the number of units in the trading box, and is considered an out transaction. The AMC ensures that the trading box never goes into a negative or a zero position where the net settled units due toout transactions exceed the number of available units in the box.

Trading – Graphical Work-flow View

The following diagram graphically depicts the movement of trading units and the different components of the trading system.

Figure 1-1 Trading_workflow

Description of "Figure 1-1 Trading_workflow"