Manage Research Fees

Eagle Accounting allows you to include research fees as a separate fee on each trade transaction along with the customary commission fee. Research fees differ from commissions and other trade fees that the system capitalizes into the cost of investments .Research fees create a receivable for the fund and are not included in the cost of the trade. The system relieves the receivable when the fund manager reimburses the fund.

As a part of Markets in Financial Instruments Directive (MiFID) II, investment managers are required to unbundle costs traditionally associated with trades. This requires you to separate research fees and commissions on all trades. Investment managers are responsible for reimbursing research fees back to the fund. Although the MiFID II regulation is an EU requirement, US fund managers that deal with EU counterparties or have offices based in Europe need to comply with the rule. As such, many US fund companies unbundle costs on trades as well.

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Understand Research Fees

The following example describes a research fee.

You receive a buy transaction with the following details:

Issue Name: XYZ Corp
Shares: 10,000.000
Price per Share: 23.50
Commission: 1,000.00
Research Fee: 125.00

Asset ID: 554677AY1
Trade Ticket: 1153

The system determines the cost of the trade by taking the trade proceeds plus the commission fees:

235,000 (10,000 * 23.50) + 1,000 = 236,000

The system does not include research fees in the cost of the transaction. Instead, it creates a receivable:

		DR	CR	Ledger Note
1010000100	COST OF INVESTMENTS	236,000.00
2002000100	INVESTMENT PAYABLE		236,125.00
1006XXXXXX	RECEIVABLE FOR OTHER FEES	125.00		54677AY1_1153

Settlement occurs when you reimburse the research fees back to the fund. Settlement can occur independent of trade settlement and is not associated with a specific security. The receivable is offset by cash:

		DR	CR
1006XXXXXX	RECEIVABLE FOR OTHER FEES		125.00
1001000100	CASH	125.00

Define Research Fees for Trades

You can apply research fees to all open and close equity and fixed income type transactions. If you unbundle research fees from ordinary commission fees, the system does not include the research fees as part of the cost of the trade. Instead it considers them reimbursable fees to the fund. If you specify a value for the Research Fee field, when you process the trade, Eagle Accounting generates a posting for a receivable that the system ultimately settles against cash once the investment manager reimburses the fund. Research costs do not affect the cost of the trade, but the system stores them as part of the trade details of the transaction. The receivable ledger posting does not reflect the security/asset from the transaction. However, in order to identify the trade/transaction associated with receivable posting, the Ledger Note field (tag 1308) displays the primary asset id of the security along with trade ticket number (tag 761 from the trade. When you define a research fee for a trade and process that trade, the system creates a cash row for the research fee, as well as a cash row for the trade.

The following equity and fixed income trade panels allow you to define research fees:

Conversion panel
Open/Close Debt Bond panels
Open/Close Discount Bond (LT/ST) panels
Open/Close Equity/Mutual Fund panels
Open/Close Inflation Linked Bond panels
Open/Close MBS/ABS/IO/PO panels
Open/Close Rights/Warrants panels

When you use these panels, the fields described in the following table are available when you define research fees.

Option

Tag

Description

Research Fees

17464

Specifies the trade's research fee in local currency. The research fee is not included in the cost of the trade. These fees create a receivable for the fund. The system relieves the receivable when the fund manager reimburses the fund. When you define a research fee, the system creates two Cash rows for trade. One Cash row is for the trade and the other Cash row is for the research fee. The research fee Cash row has an event type of RESEARCH_FEE.

After you specify a value, the system updates the Base Net Amount value accordingly. Also, the Ledger Notes field appears in the Other Information area.

Ledger Notes

1308

Displays the security's primary asset ID (tag 14) and the trade ticket identification number (tag 761). This field appears if you specify a Research Fees field value for the trade. The system stores this information on Cost and Cash rows in order to tie each research fee Cash row back to the originating trade.

Settle Research Fees

Settlement occurs when the fund manager reimburses the research fees back to the fund. Settlement of the research fee can occur independent of trade settlement and is not associated with a specific security. The receivable is offset by cash.

You can settle the research fee in several ways. For example, you can settle the research fee cash row separately using the manual cash settlement process with the Run Multiple Settlements panel. You can use this option to settle the fees on a different date than the trade date. You can also settle the research fee cash row using the auto settlement process or the contract cash process. These options allow you to settle the fee at the same time as the trade. For example, you can use the Add Cash Contribution panels or the Run Contract Cash panel.

Adjust Research Fees

When you book a trade, you do not always know the actual research fee amount at the time the trade posts. When you know the actual research fee amount, or if the research fee amount changes, you can adjust the research fee.

You can make adjustments to research fee amounts by either cancelling and rebooking the trade or by using receivable/payable events to adjust the Receivable for Other Fees ledger account.

WRITERS NOTE: Henry to identify exactly how you adjust the fee (panel name)

Research Fees and STAR to PACE Direct

If you use Eagle Accounting along with Eagle Performance and use STAR to PACE Direct, STAR to PACE Direct uses the STAR_PERF_FLOW code category values during processing. A STAR_PERF_FLOW code applies to the RESEARCH_FEES event. For more information, see About STAR_PERF_FLOW Code Values.

WRITERS NOTE: AK to review this section

Report on Research Fees

The results for the following reports reflect research fees:

Trade Activity report
Trial Balance report
Ledger Subledger Reconciliation report