About Close Transactions and Same Lot Selection
- Nancy Cohn (Deactivated)
Same lot selection affects various types of close transactions during automated and manual transaction processing.Â
About Automated Closes and Same Lot Selection
When you use same lot selection, the system uses the entity's controlling basis to determine lot selection results for controlling and non-controlling bases when it automatically creates close transactions for positions.
The system references the lot structure of the close from the controlling basis in order to attempt to maintain the same lot structure across the controlling and non-controlling bases. The system uses the lot's Orig Event ID field (tag 457) to match a single open lot in one basis to corresponding multiple open lots in another basis, as needed.
When the system perform same lot selection processing, it assigns the lot selection method of SMLOT to the close transactions it creates for the non-controlling basis. This indicates that the close transaction's lot selection method was assigned by the system as a result of same lot selection processing. If the system cannot identify a controlling basis when it processes close transactions automatically for a non-controlling basis, the same lot selection process does not occur.Â
About Manual Closes and Same Lot Selection
When you use same lot selection, the system uses the entity's controlling basis to determine lot selection results for controlling and non-controlling bases when you manually create close transactions for positions. By default, the close trade panel displays the lot selection method associated with the entity's controlling basis, if one exists.Â
The system references the lot structure of the close from the controlling basis in order to attempt to maintain the same lot structure across the controlling and non-controlling bases. The system uses the lot's Orig Event ID field (tag 457) to match a single open lot in one basis to corresponding multiple open lots in another basis, as needed.Â
When the system perform same lot selection processing, it assigns the lot selection method of SMLOT to the close transactions it creates for the non-controlling basis. This indicates that the close transaction's lot selection method was assigned by the system as a result of same lot selection processing.
If you select the Identified Lot (IDLOT) lot selection method where the specified lot or lots are sold first, the lower pane in the close trade panel displays lot details for each available lot, as determined by the entity's controlling basis. If no controlling basis exists, the panel displays lots for the primary basis. You must specify the quantity for one or more lots that you want to relieve. The total quantity you specify for the open lots must match the quantity entered for the total close.
About Pending Transactions and Same Lot Selection
When you use pending transactions and also use same lot selection, the system stores pending transactions for the controlling basis only, and creates trades for each additional basis when it is processing the pending trade. If you manually cancel a trade for an entity with the Pending Trade Eligible Indicator (tag 3679) set to Yes, the system inserts a copy of the manually cancelled transaction into the Pending Trades table for the controlling basis. Otherwise, if there is no controlling basis, it stores only a copy of the transaction for the primary basis.
About Corporate Action Transactions and Same Lot Selection
Same lot selection affects how the system selects lots when processing certain corporate actions associated with close activity. This ensures that the system can associate lots in one basis with the same originating lots in another basis.
When you use same lot selection, the system ensures it can identify lots created from taxable and non-taxable corporate actions and keep each basis in sync in terms of lot identifiers based on the corporate action activity. This includes To side opens such as entitlements created from lots that are fractured on a close of an underlying security and also includes open lots from payments in kind (PIKs), spinoffs, and so on. The system ensures that corporate action processes such as voluntary tenders that create partial closes close the same lots across bases. Straight through options processing such as the assignment of a short put option or exercise of a long call closes the same lots in each basis.
The system uses a single commit scope methodology while processing corporate actions with a From/To side such as nontaxable mergers with same lot selection to ensure that From/To corporate action processing for actions has all the appropriate data available on the controlling basis From side and the non-controlling basis To side so that the non-controlling basis can process correctly. For example, if certain information is missing such that only some, but not all, of the From/To transactions for the corporate action across controlling and non-controlling bases can process successfully, the system does not process any of the related transactions. In this manner, the system ensures that all transaction for the corporate action process successfully in order to keep the lot structures in sync.Â
About Transfer and Adjustment Transactions and Same Lot Selection
When you use same lot selection, various "Reorg" type transaction panels display the controlling basis by default for the transaction. Examples include the Run Interportfolio Transfer panel. If no controlling basis is available, the panels display the selected entity's primary basis by default.
This enables interportfolio transfers to select the same lots when transferred out. The controlling basis identifies which lots were closed, and how much was closed from each, and passes that information over to the non-controlling bases, where it performs the close in an identified lot manner.