Stale factor processing automatically corrects trades that are processed with incorrect or stale factors.
An example of a stale factor trade occurs when a security is bought in one month and settled in a future month. Because factors are not known in advance, the trade is set up with the current month's factor. When the factor for Settlement Date becomes available, the factor on record for the trade is now known as "stale." The trade would now have to be cancelled, and rebooked with the current factor.
Eagle Accounting can auto-correct trades that were input with stale factors when running factor processing. Stale factor processing works as follows: when factoring is run against a position with stale factor buys and/or sells, the factor procedure rolls back the stale trade, then replays the trade with the correct amounts, based on the new factor. The original trade is canceled and stored with the original amounts, reflecting the stale factor.
Eagle Accounting does not automatically roll back and replay a trade with a stale factor. If you want Eagle Accounting to automatically roll back and replay stale factor trades when factor processing is invoked, you must set the Stale Factor Processing (tag 8141) field to Yes at the entity level. For details, see Create/Edit Entity Panel Options.
When you set the entity's Stale Factor Processing field to:
- Yes. Stale factor processing occurs when you run factor processing and process paydown/payup transactions. Processing ignores the lot level Stale Factor Processing value but updates it to reflect the current value of the entity level Stale Factor Processing field. The system determines rollback by the Settlement date, orders replay by the Trade date, and creates paydowns with the correct quantity.
- No. Stale factor processing does not occur when you run factor processing. Processing ignores the lot level Stale Factor Processing value but updates it to reflect the current value of the entity level Stale Factor Processing field. The system determines rollback by the Settlement date and orders replay by the Trade date.
All activity with the Trade date less than the Paydown date and the Settlement date less than the Paydown date created with a stale factor needs to be rebooked. Paydowns that occur when there is a Close with the Trade date less than the Paydown date and the Settlement date greater than or equal to the Paydown date and have a stale factor do not have the correct quantity until the Close is rebooked with the correct factor. If the Close has the current factor at the time of the paydown, the paydown has the correct quantity.
State Factor Processing Example
An example of Stale Factor Processing follows.
A trade was bought on 3/8 and settled on 4/4, with a Factor of 1 (a Stale Factor), as shown in the following table.
Option | Value |
|---|---|
Original Face | 1,000,000.00 |
Current Face | 1,000,000.00 |
Factor | 1.0 |
Price | 100.00 |
Principal | 1,000,000.00 |
Coupon | 5%` |
Accrued Interest Bought | 416.67 (1,000,000.00 * 5.00% / 360 * 3 days) |
Net Amount | 1,000,416.67 |
You enter a Factor of .9 on 4/1. When the factor process is run, Eagle Accounting automatically rolls back the original trade and replays it with the correct 4/1 factor of .9.
The trade now appears as shown in the following table.
Option | Value |
|---|---|
Original Face | 1,000,000.00 |
Current Face | 900,000.00 |
Factor | .90 |
Price | 100.00 |
Principal | 900,000.00 |
Coupon | 5% |
Accrued Interest Bought | 375.00 (900,000.00 * 5.00% / 360 * 3 days) |
Net Amount | 900,375.00 |
If the Stale Factor Processing option is not enabled for the entity associated with the trade in Eagle Accounting, you have to manually cancel the original trade when the factor is known, and then manually rebook the new trade using the current factor.
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