How Same Lot Selection Affects Close Processing

When you use same lot selection, you identify an accounting basis within an entity as the controlling basis for lot selection. When the system executes a trade on both bases, it uses the lot selection results of the controlling basis to perform lot selection for the non-controlling basis. The Original Event ID (tag 457) acts as a common lot identifier on transactions and the common link across lots for multiple accounting bases. This identifier indicates that a lot in a position on one basis is the same lot on another basis. Due to fractured lots caused by wash sales, multiple lots on one basis can correspond to a single lot on another basis. This tag has the same value on the fractured lot and its sub-lots in the case of wash sales and should be true for converted lots across bases. 

Say the system is processing a close for a transaction that uses the Identified Lot (IDLOT) lot selection method. When the system identifies the lot or lots to close, it can create a close that spans across open lots if multiple targets exist. This example applies to an IDLOT close transaction that must span across lots created as a result of wash sale processing. In the example of a wash sale, an open lot can be fractured. The fractured open lot and its sub-lots all share the same Original Event ID but have different open event Ids (STAR tag 151).

When an IDLOT close transaction is processed in STAR, the close attempts to find either a matching trade ticket number or open event ID for the close message’s target trade ticket number or target event ID. Once a match is made the code discontinues the “search”. In the case of a fractured lot, the client may want to target the fractured lot and its sub-lots with one close message. This will be possible after this development is complete as the IDLOT logic will consider multiple matches based on original event ID as long as the open lot quantities can satisfy the close quantity. This course of action would be more prevalent where the secondary or non-controlling basis had wash sales “on” where the primary or controlling basis did not.

About Same Lot Selection and Pending Transactions

For entities marked as pending trade eligible (tag 3679 set to Y), a copy of the manually cancelled transaction is inserted to the Pending Trades table for the controlling basis. Previously, only a copy of the transaction for the primary basis was stored.

About Reconciliation and Same Lot Selection

If you use same lot selection and use Eagle solutions for reconciliation, STAR to PACE Direct sends the Original Event ID to the Eagle data warehouse tables for use in reconciliation when comparing lots. You can set up the reconciliation process to identify expected accounting differences and to assign reason codes that inform you why lots are out of sync. For example, if you have known amortization methods differences between bases that would cause a break each day, you can set up rules to evaluate the difference to see if it met certain conditions. If conditions are met, the system can flag the amortization difference as an expected or known difference and assign it a specific reason codde.