Floating Price Instruments Priced at 0.99 Examples

In the following set of scenarios, the sweep asset is identified as a Floating Price Instrument in the SMF record. For simplicity and illustrative purposes, the original sweep price is 1, and the subsequent sweep is processed at a price of 0.99.

These examples illustrate how the system maintains principal and income balances when you run the cash sweep process for floating price instruments rather than for sweep assets priced at 1. Each scenario shows how the system maintains the units and principal and income breakdown for the STIF asset and the cash account before and after a cash sweep. The different scenarios show what happens when all, principal, and/or income balances are positive or negative. Certain scenarios also indicate what happens when negative balances can or cannot be covered by the sweep asset.

Scenario 1: All Balances are Positive

Current Price = 1, Sweep Price = 0.99

With a positive cash position the sweep processes a BUY of the STIF at the market price, and Principal and Income move according to their cash balances.

In this case, the $1,000 in cash generates units of ($1,000 / 0.99) = 1,010.101. Thus STIF units of (200 + 1,010.101) 1,210.101.

Before

After

Scenario 2: Total and Income Balance Negative, Can be Covered

Current Price = 1, Sweep Price = 0.99

This scenario shows a cash balance that can be covered by the designated STIF vehicle. As such, the STIF sell moves $100 at a price of 0.99, resulting in ($100 / 0.99) = 101.01 units being sold.

Note that a loss is generated on that sell transaction. Here 101.01 units were moved for $100, resulting in a loss of $1.01. Principal and income are traded to fully cover the cash shortfall.

Before

After

Scenario 3: All Balance Negative, Cannot be Covered

Current Price = 1, Sweep Price = 0.99

Here you have a cash shortfall that cannot be covered. The STIF asset is fully closed, with 200 units sold for (200 * 0.99) $198.00. The total cash shortfall is only reduced to $102, and because there was a loss of $2.00 on the sale of the STIF, the Principal balance is reduced by ($150 from the STIF principal, -$2 from the realized loss) $148.

Before

After

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