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Cash segregation allows you to track a single asset held at more than one custody location. A custody location refers to a custodian bank in combination with the custody account number. You can set up the custodian bank codes and cash accounts used to identify custody locations. You must establish a specialized accounting basis designed to track segregated cash account balances for each entity eligible for cash segregation processing. A CUST accounting basis is provided at installation for this purpose; this accounting basis is called the custody basis. You must also create rules that the system uses during transaction processing to assign the cash account when it generates transactions for entitlements such as income and corporation actions or when it processes other transactions where the cash account information is not available. You create these rules by setting up bank account relationships and cash account relationships. The rules can apply to a single entity or to a group of entities.

Create or Edit Entities for Cash Segregation

Several fields at the entity/accounting basis level affect processing related to cash segregation.

To use cash segregation, you must identify entities eligible for cash segregation processing by creating a custody accounting basis (custody basis) for those entities.

A custody basis is an accounting basis that has the Position Cash Segregation field set to a value of Yes. By default the system assign the custody basis a name of CUST. An entity can have only one custody basis. You typically assign a non primary, non controlling accounting basis as the custody basis.

Eagle recommends that you identify an accounting basis as the custody basis when you first add an entity and before you begin to process transactions for that entity. Alternatively, you can use the Add a Basis to a Portfolio panel to add the custody basis for an existing entity before you begin to process transactions for that entity.

You cannot add a custody basis for an entity that has holdings.

To manually create an entity with a custody basis for cash segregation:

  1. From any Eagle window, click the Eagle Navigator button to access the Eagle Navigator.
  2. Enter the panel name to add or change a basic accounting entity or master fund in the Start Search text box.
    Fields at the accounting basis level affect cash segregation processing. Cash segregation fields for entities appear on the Create/Edit Entity panel and Create Master Fund panel. These panels are available in Portfolio Data Center and in Accounting Center. 
  3. Click the link to access the panel.
  4. Enter the entity name and identification information for the entity you are adding, along with information for the primary accounting basis, such as GAAP, IFRS, STAT, or USTAX.
  5. Click the Position Cash Segregation Basis Indicator field and select Yes to indicate that you want the system to create a custody basis for the entity.
    The system sets the value of the Segregate Derivatives field to Yes..
  6. Click the Custody Basis field, and enter the name of the non primary accounting basis to add as a custody basis for use in cash segregation.
    The default value is CUST.
  7. As you set up the settlement fields, set both the Cash Suspense Processing field and the Replay Suspense Processing field to a value of Yes.
  8. In the Controlling Basis field, ensure no value is selected.
    The system does not support an accounting basis that has the Position Cash Segregation Basis Indicator field set to a value of Yes and also has the Controlling Basis field (tag 4949) set to a value or Yes or No. When you define a custody accounting basis, tag 4949 must have a null value.
  9. Complete the remaining options on the panel for the entity.
  10. Click Submit.

On this page

Create/Edit Entity Panel Options - Cash Segregation Related Fields

The following are the options in the Create/Edit Entity panel and the Create Master Fund panel that apply to cash segregation.

OptionTagDescription

Core Accounting Fields



Auto Settle Indicator58Indicates whether the system settles trades, coupons, and miscellaneous income and expenses automatically. Options include:
  • No. Default. The system does not automatically settle trades, coupons, and miscellaneous income and expenses. You must schedule the settlement for these transactions using the Run Contract Cash panel. Or, manually settle the transactions using the Run Multiple Settlements panel. If you use cash segregation based on actual cash settlements, you can schedule settlements using the Run Cash Auto Match panel and create settlements manually using Cash Matching. Eagle recommends that you set this field to No.
  • Yes. The system automatically settles trades, coupons, and miscellaneous income and expenses. If you enter Yes, the system creates a settlement as soon as the trade is processed. There is no trade to settle date gain/loss. This applies even if the settlement date is in the future.
Segregate Derivatives16253Indicates whether the system segregates derivative positions by clearing broker for the entity. Otherwise, If you do not use cash segregation for the entity, you can segregate derivatives in order to allow the system to process derivatives with multiple brokers. Options include:
  • Yes. Eagle Accounting segregates derivatives. If you set the Position Cash Segregation Basis Indicator field to Yes, indicating that you use cash segregation and the entity has a custody accounting basis, the system sets the Segregate Derivatives field to Yes. The system must additionally segregate derivatives on the non custody basis because cost is notional and the system determines cash based on the lot closed. If you set the Position Cash Segregation Basis Indicator field to no and the entity does not use cash segregation, you can also select Yes to process derivatives with multiple brokers and keep positions segregated by clearing broker. 
  • No. Default. Eagle Accounting does not segregate derivatives. 

Cash Segregation Fields



Position Cash Segregation Basis Indicator 11675Indicates whether to create a custody basis for the entity for use in cash segregation. Options include:
  • Yes. The system creates a custody basis for the entity. When you submit the entity, the system creates an entity record, a record for the entity's primary accounting basis, a record for the custody accounting basis, and accounting periods for both the entity/primary accounting basis and the entity/custody accounting basis. The system assigns the appropriate default settings for the custody basis. For example, a custody basis does not require income, amortization/accretion, or ledger processing. If you select a value of Yes, the system also sets the Segregate Derivatives field to Yes.
  • No. The system does not create a custody basis for the entity. If you set the entity-level Cash Sweep option to Yes, this option displays a value of No and is locked.
Custody Basis7004Specifies the name of the non primary accounting basis to add as a custody basis for use in cash segregation. The default value is CUST. This field appears if you set the Position Cash Segregation Basis Indicator field to a value of Yes. Tag 7004 is a work tag and is not stored.

Settlement Fields



Cash Suspense Processing3950Indicates whether the system performs cash suspense processing. Cash suspense processing is started when the system attempts to settle transactions that do not match (the system cannot find a receivable or payable to settle). Options include:
  • Yes. The system performs cash suspense processing. If the transaction is not found, it posts an entry to the cash suspense account. If you select Yes, the Replay Suspense Activity field becomes available.
  • No. The system does not perform cash suspense processing. It flags the unmatched transactions as errors and sends them to the Exceptions workspace for review.
Replay Suspense Activity12074Specifies whether to activate the process that matches up a trade cancellation with the settlement, reverses the settlement, and replays the matching process. If there is no match, the item is posted into suspense. This can also apply to corporate actions. This field appears when you set Cash Suspense Processing to Yes and is required under that circumstance. Options include:
  • Yes. Default. The system activates the process that matches up a trade cancellation with the settlement, reverses the settlement, and replays the matching process. If there is no match, the item is posted into suspense.
  • No. The system does not activate the process that matches up a trade cancellation with the settlement, reverses the settlement, and replays the matching process. When you use cash segregation and have a transaction cancelled, the traded cash and linked settled cash are cancelled.
Cash Breakage Election12071Indicates whether breakage activity is posted to the income account (3009000200) or both the principal account (4002000300) and income account. Options include Income (Default) and Both Principal and Income.

Add a Custody Accounting Basis

In the Add a Basis to a Portfolio panel, you can add a custody basis to an existing entity or a master fund. To use cash segregation, you must create a custody accounting basis (custody basis) for each entity eligible for cash segregation processing. A custody basis is an accounting basis that has the Position Cash Segregation field set to a value of Yes. By default it has a name of CUST. An entity can have only one custody basis. You typically assign a non primary, non controlling accounting basis as the custody basis. You must add the custody basis before you begin to process transactions for that entity.

At this time you cannot add a custody basis for an entity that has holdings.

To manually add a custody basis to an existing entity or master fund:

  1. Do one of the following:
    - In Accounting Center, in the left navigation pane, click Setup > Portfolio Setup > Accounting Basis > Add a Basis to a Portfolio.
    - In Portfolio Data Center, in the left navigation pane, click Portfolio Desk > Accounting Portfolio Setup > Accounting Basis > Add a Basis to a Portfolio.
    You see the Add a Basis to a Portfolio panel.
  2. Click the Entity ID or Entity Name field and enter the entity for which you are adding an accounting basis.
  3. Click the Accounting Basis field and select the value you use to identify a custody basis.
    For example, CUST.
  4. Click the Position Cash Segregation Basis Indicator field and select Yes.
    A value of Yes indicates this accounting basis is the custody basis used for cash segregation processing. After you select Yes, the system assigns the appropriate default settings for the custody basis. For example, a custody basis does not require income, amortization/accretion, or ledger processing.
  5. Complete the remaining options on the panel.
  6. Click Submit.

  7. Add an accounting period for the new accounting basis.

When you create a custody (CUST) accounting basis, the system assigns the basis the following default values.

OptionTagComments

Null Default Values



Controlling Basis4949
Regulatory Category12387
Regulatory Category Effective Date9371
Ledger Granularity Rule Name8939
Ledger Granularity Rule Effective Date155
Cost Basis Covered Indicator2818
Book Value Breakdown Flag2904

N (No) Default Values



Primary Basis Indicator8130
Bifurcation Method5825
Ledger Processing8128
Mixed Cost Basis Indicator11664
Cost Cash Processing5006

Y (Yes) Default Values



Wash Sale Inhibit Indicator775
Cash Processing8125
Unrealized Gain/Loss Indicator5383
Gain/Loss on Paydowns1871
Call Redemption Gain/ Loss Indicator8916
Sink Fund Gain Loss Flag9923
Short Term Discount Accrual8919

Other Default Values



Cost Method22Default value of I (Identified).
Lot Selection Method 27Default value of FIFO (First In First Out).
Cost Method Cash9924Default value of I (Identified).
Accounting Basis Lot Selection Rule7102Default value of A (Always Use Basis Value).
Accounting Period Frequency624Default value of D (Daily).
Primary Amortization/Accretion Rule3197Default value of DEFAULTNONE.
Primary Amortization/Accretion Rule Instance4622Default value of 17.
Secondary Basis Replication Rule7249Default value of R (Replicate All Events).
Secondary Basis Replication Rule Instance10560Default value of 0.
Postmatrix Type11708Default value of CORE (Core).
Principal Loss on Paydown Processing Flag2925Default value of G (Realized Gain/Loss).
Coupon Cash Entitlement Level11852Default value of Position Level.
Cash Div Cash Entitlement Level9922 Default value of Position.

Values That You Can Set



Accounting Basis code21Eagle recommends that you use CUST as the custody basis.

Create Composites for Cash Segregation

When you use cash segregation, you can create a set of rules for either an entity or for a group of entities to link together a transaction with the appropriate cash account at a custody location. If the rules apply to a group of entities, you can create a composite to group together the entities. 

To create a composite for use with cash segregation:

  1. Do one of the following: 
    - In Accounting Center, in the left navigation pane, click Setup > Portfolio Setup > Composites > Create Entity Composite.
    - In Portfolio Data Center, in the left navigation pane, click Portfolio Desk > Accounting Portfolio Setup > Composites > Create Entity Composite.
    You see the Create Entity Composite panel.
  2. Click the Entity Type field and select Composite.
    A composite, which has an entity type of COMP, is comprised of multiple underlying entities each having the entity type of Portfolio (PORT).
  3. Click the Accounting Basis field and enter the value you use to identify a custody accounting basis.
    For example, CUST.
  4. Enter the values for the remaining field on the panel.
  5. Click Submit.
    You can then use the Add Entity to Composite panel to associate a group of portfolios with the composite you created.
  6. Ensure that each portfolio that is a member of the composite includes a custody accounting basis that has the Position Cash Segregation Basis Indicator field set to a value of Yes.

Create a Default Entity for Unmatched Cash

When you set up each cash account used in cash matching, you can identify a default entity, called the Default Portfolio, to use for sweeping, or releasing, unmatched cash into accounting at the end of the day. The system applies settled cash to this entity as settled cash in a suspense state. You can identify or create the default entity or entities that you plan to use for this purpose. 


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