Capmatix Regulations - transaction costs and market data service

Calculate transaction costs comprehensively

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The PRIIPs and MiFID II regulations that came into effect across all EU member states in 2018 had a big impact on the costs and charges transparency for investment funds. For the first time fund managers where obliged to disclose how much the transactions within the fund portfolio cost to the investors.

As the PRIIPs KID is a pre-sale disclosure, the transaction costs disclosed according to the regulation are "ex ante" (estimated costs as of today), while according to MiFID II regulation the transaction costs disclosed are both "ex ante" and "ex post" (actual costs incurred over the last year).

The PRIIPs RTS provides detailed methodology for calculating transaction costs and definition of the cost components which have to be captured:

  • Explicit costs are specific fees and expenses which are paid to other parties to perform the transaction. These expenses are paid out of the fund's portfolio (e.g. broker fees).
  • Implicit costs are not directly incurred by the fund manager. Rather, they reflect difference between the fair price at the time of the order and the executed price.

 

2 approaches for calculating transaction costs are described in the PRIIPs KID RTS:

 

  • In the "full PRIIPs" approach, also known as "arrival price" or "slippage" the transaction cost is calculated based on the spread between arrival price (mid-price) at the time the order was sent and the actual execution price.
  • In the "new PRIIPs" approach, also known as "half spread" the transaction cost is calculated based on half of the bid/ask spread.

 

Full PRIIPs approach 

The full PRIIPs methodology is based on the client’s transaction data and focuses largely on the intraday prices of liquid assets. The challenge lies in the sourcing of accurate and reliable intraday prices which requires automation and integration with multiple data sources.

New PRIIPs approach

This methodology is also based on the client’s transaction data. This time focusing on assets for which no intraday market prices are available, or where the available mid-prices are inaccurate. In such cases, the recommended practice employs average spreads to calculate transaction costs.

 

 


With Capmatix Regulations you can calculate transaction costs using different methods in parallel.

 

  • Transaction cost calculation as per requirement of regulations (PRIIPs, MIFiD II, UK Disclosure, RG97 etc.)
  • Estimation of transaction costs for PRIIPs with history as well as new PRIIPs
  • Flexibility to apply "full PRIIPs" or "new PRIIPs" approach
  • Look-through for calculation of transaction costs for Fund of Funds products
  • Integration with prices and fair value calculations from leading market data providers
  • Control all transactions with a web-based SaaS Service solution
  • Enhanced visualization with a comprehensive dashboard
  • Streamlined automated process
  • Data validation and exception detecting procedures
  • Flexibility of input and export data structures

 

Capmatix Regulations offers a wide array of facilities under a single touch point, for a seamless and hassle-free regulatory experience:

 

 

Transaction data can be delivered using the Capmatix regulation standard template or any other customized source

Clients can select one or more market data vendors (e.g. Refinitiv, IHS Markit) to determine arrival prices

Customized rules and thresholds can be set for automatically selecting the "best" arrival price

Fall-back rules for missing or false data can be also be set

Data validation and quality assessment rules can be customized according to client criteria

Other advantages

Easy access:

• "One stop shop" - a comprehensive solution from one single provider

Onetime setup covering complete data integration and system configuration

 

High coverage:

High coverage of intraday prices for traditional and more exotic financial instruments

On-demand price collection as a function of client's transaction information

 

Performance test:

High-frequency testing of data quality

Optional integration of required quality levels

 

Add-ons:

Coverage analysis can be provided

Customized reports and various exports can be configured according to client needs

Do you have any further questions?

We will be in touch with you as soon as possible to answer all your questions.