4.41.5 EAR Marking

This topic provides information about EAR Marking.

Holdings in the fund will be earmarked when Source to Fund or Target to Source switch is generated as follows:

Whenever an outflow transaction is captured, the system will check the unit balance including unallocated units from any other outflow transaction of the same fund. If the unit balance thus calculated is less than the transaction value, the transaction generation will fail for Insufficient Unit Balance.

In case of an unallotted unit based or percentage based transactions, the system will identify unallocated units from the transaction details.

In case of an unalloted amount based transaction, system will compute the unalloted units as follows:

Unallotted units = Amount / (Latest Available NAV * (1- Fluctuation %)

Note:

Fluctuation % is a system level param value that can be maintained in Parameter Maintenance Screen (UTDPARAM) considering the maximum load and maximum fluctuation in price that can happen. The systme will maintain the param code as FLUCTUATIONPERCENT.

When yield is met for a specific lot of transaction (x units), system will check if the unit balance calculated as mentioned above and will generate the switch back for “x” units or calculated UH balance, whichever is less.

Example

Scenario 1: Balance check for unit based unallocated transaction and EQF1 (Target Fund)

Table 4-53 Example on Balance check for unit based unallocated transaction

Date	Transaction	Units	Comments
1-Oct-16	Pseudo Switch In	100	-
5-Oct-16	Redemption	30	This redemption to be allocated on 07-Oct-2016
-	30 units in this transaction will be ear marked	-	-
6-Oct-17	Pseudo Switch Out	70	Yield is met, switch back generated for (100-30) un

Scenario 2: Balance check for amount based unallocated transaction and EQF1 (Target Fund)

Table 4-54 Example on Balance check for amount based unallocated transaction

Date	Transaction	Units	Comments
1-Oct-16	Pseudo Switch In	100	-
5-Oct-16	Redemption for TWD 300 using latest NAV as 10. Hence 30 units would be ear marked.	30	This redemption to be allocated on 07-Oct-2016
6-Oct-17	Pseudo Switch Out	70	Yield is met, switch back generated for (100-30) units

During actual allocation of Redemption transaction in above examples, if the allocated units are;

Greater than calculated units (30 units), auto switch back or redemption will fail for insufficient balance error based on which transaction is allocated first.

Less than calculated units (30 units), the particular lot will have residual units which will not be considered for yield computation and will not be switched back.

Scenario 3: Balance check for unit based unallocated transaction with Transaction types and EQF1 (Target Fund)

Table 4-55 Example on Balance check for unit based unallocated transaction with Transaction types

Txn types	Date	Transaction	Units	Comments
SWI1	1-Oct-16	Pseudo Switch In	100	-
SUB1	2-Oct-16	Subscription	50	-
RED1	5-Oct-16	Redemption	30	This redemption to be allocated on 07-Oct-2016 and aged against SWI1
SWO1	6-Oct-17	Pseudo Switch Out	70	Yield is met, switch back generated for (100-30) units

Scenario 4: Balance check for unit based unallocated transaction with Transaction types and EQF1 (Target Fund) along with order of allocation

Table 4-56 Example on Balance check for unit based unallocated transaction with Transaction types and EQF1 (Target Fund) along with order of allocation

Txn types	Date	Transaction	Units	Comments
SWI1	1-Oct-16	Pseudo Switch In	100	-
SUB1	5-Oct-16	Subscription	50	Allotted
RED1	6-Oct-16	Redemption	20	Allotted
RED1	7-Oct-16	Redemption	30	Unallotted
SWO1	10-Oct-17	Pseudo Switch Out	50	Remaining units from SWI1
RED1	15-Oct-16	Redemption	50	-

In this scenario SWO1 may fail during allocation depending on the order of allocation of SWO1 and RED3.

Scenario 5

Table 4-57 Scenario 5

Txn types	Txn Date	Transaction	Units	Comments
SUB1	10-Oct-16	Lump sum	500	-
SWI1	15-Oct-16	RIS - Switch-in	100	-
RED1	17-Oct-16	Redemption	120	Unallotted
SWO1	20-Oct-17	Auto-switch	100	-

Scenario 5 - Case 1

Table 4-58 Scenario 5 - Case 1

Ageing Sequence	Units
RSP	1
Lump sum	2
RIS	3

Auto-switch will be successful

Scenario 5 - Case 2

Table 4-59 Scenario 5 - Case 2

Ageing Sequence	Units
RIS	1
Lump sum	2
RSP	3

Auto-switch may fail, because redemption may age out from RIS

Fund Suspension

If either source fund or target fund is suspended, neither source to target switch nor target to source switch will happen.

Figure 4-38 Transaction Suspension

Description of "Figure 4-38 Transaction Suspension"