Principal and Income Examples with Negative Cash Balances

The following example illustrates how the system maintains the principal and income balances when you run the cash sweep process.

Each scenario shows how the system maintains the 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. They illustrate how when a negative cash balance exists, if the sweep asset has enough total cash to cover the shortfall, the system bases the P&I breakdown on the cash account proportions. Otherwise, when a negative cash balance exists, if the sweep asset does not have enough cash to cover the shortfall, the system bases the P&I breakdown on the sweep asset proportions.

Scenario 1: All Balances are Positive

This is the most basic scenario, where all balances are positive. The cash balance is totally closed and a BUY of the STIF asset for $1,000 is made, and the principal and income balances move to the STIF asset.

Before

After

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

In this scenario the fund has a negative cash balance due to principal transactions (partially offset by income), and that balance can be fully covered by the STIF asset.

A sell transaction out of the STIF is made to bring Total, Principal, and Income cash to zero. Therefore the STIF position is positive but the principal balance is negative, while income is positive.

Before 

After

Scenario 3: Total and Principal Balance Negative, Cannot be Covered

This scenario has a cash position that would oversell the STIF asset. In those cases the system fully closes the STIF to cover as much of the cash shortfall as possible. This also means that the Principal and Income balances of the STIF security are fully closed, which ensures that the cash position balances between total, principal, and income.

Before

After

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