General OP Questions
Why should Fund Managers provide information in the Open Protocol format? Should the Open Protocol reports replace what the Managers are currently providing in terms of risk reports/newsletters?
The Open Protocol is not designed to replace a manager’s current risk report, but to supplement it, so that investors not only get a good understanding of the individual fund but also their overall portfolio by aggregating and integrating their exposures. We understand that the risk reports currently provided by managers to their investors show the risks of the fund as the manager sees them, so we fully expect managers to keep providing these reports if they would like to do so, alongside the Open Protocol reports.
Would the production of Open Protocol reports stop us from treating all clients equally? We don't want to set a precedent by creating bespoke reports for one client when other clients will ask for some other information.
Investors are increasingly asking for bespoke information, and the proliferation of bespoke risk reports are very expensive for managers to produce. Many managers have taken a stance that they will not create any bespoke reports as these are expensive to produce, and lead to the preferential treatment of certain clients. The Open Protocol report is the perfect solution for this problem. It was constructed keeping in mind many various client requests, with the objective of creating one universal report covering most of the requests. Open Protocol can be thought of as a single solution for all client requests. Open Protocol reports can be distributed to all investors at the discretion of the manager, so that no single investor would benefit more than any other investor.
When was the Open Protocol finalised? How frequently will the Open Protocol template & manual be updated?
The Open Protocol was formally launched on 9th August 2011 in London and on 11th August 2011 in New York and has been updated since. The Open Protocol template & manual are expected to be updated when significant changes occur in the financial industry to accommodate these developments. The latest two updates were related to the digital assets and ESG inclusion in the Open Protocol report, and the GICs classification revision. The Working Group expects to convene on at least an annual basis to discuss any changes which may be required. However, the template is not expected to be updated frequently, due to the work required by all parties to update their reporting systems. If you have any suggestions for changes to the templates, please email us at [email protected]
Who controls the Open Protocol Data? Is the Open Protocol a central data warehouse?
The Open Protocol is not a centralized data warehouse. The Open Protocol is a methodology or a language. It is not a data hub or utility. There is neither a central ‘owner’ of the data, nor a single entity outside of the Working Group controlling the standard. Hedge fund managers retain control of their data and decide to whom it should be distributed.
Is there a strategy specific OP template?
No, there is only one template for all strategies. Managers provide their investment strategy category in section 1.4. of the template.
Do we need to provide Open Protocol reports if we will also be providing Form PF? How does Open Protocol compare with Form PF?
Form PF and AIFMD are required by regulators and do not have any direct connection with Open Protocol. However, Open Protocol is compatible with Form PF, and managers can fill in the majority of Form PF if they have Open Protocol already set up. The SEC has kept the methodology flexible for Form PF and therefore the methodology defined under Open Protocol can also be used for Form PF. Regulators are largely concerned about systemic risk while investors are concerned about a broader range of risks. Open Protocol is therefore a more robust solution for investors.
Which third party service providers (Administrators and Risk software companies) produce Open Protocol reports?
There is a long list of administrators that produce Open Protocol reports. Funds should talk to their administrator directly to find out their current status. Please find the list of the service providers producing Open Protocol reports in the following link.
The GICS categories are periodically updated. Is the OP template updated every time GICS is updated?
Historically, the Open Protocol template was updated in August 2016 to add Real Estate as the 11th sector, and in October 2018 when GICS broadened the Telecommunication Services sector and was renamed to “Communication Services”. However, the OP template will not be updated every time GICS is updated, because this would require everyone currently producing or using the reports to implement system changes.
OP Logistics Questions
Is there a deadline for producing the first Open Protocol report?
It is expected that managers need some time to get their systems in place to generate Open Protocol reports. From experience to date, managers tend to take 1 to 3 months to set up their first risk report in the Open Protocol format.
How often should this report be produced? How soon after the end of the month should the report be produced?
The working group expects this to be a monthly report, and typically it should be produced and distributed 20 business days after month end. For Multi strategy funds and Distressed – Restructuring funds, this is extended to 30 business days after month end. However, there are no set rules about this, and the managers have complete discretion on the frequency and timing of the report.
What delivery options are there for reports according to the standard?
Open Protocol has defined two reporting formats, an excel spreadsheet and an XML schema (which can be used for machine-to-machine dialogue). Both these templates are available on the Open Protocol website for all to download. PDF reports are not permitted since they would not allow for systematic aggregation.
Is it possible for us to deliver a partially completed report that omits answers to particular questions or sections altogether?
All managers would be required to fill sections 1. Fund and Investor Details and 11. Counterparty Exposure and at least one of asset class sections 2 to 7, and 13. If a manager trades more than one asset class (even if it is a hedge) then they should complete all the relevant asset class sections. For each of the sections, managers would be required to fill in at least Grade 1 information but could choose different grades in each section. Managers are also encouraged to report sections 8-10 (Value at Risk, Sensitivities and Stress Tests), if applicable to their strategy, and strongly encouraged to report section 14. ESG Module.
Can a manager change any of the fields or add/remove cells in the Open Protocol template?
No. The Manager should not edit the Open Protocol template in any way. The template and schema are both fixed, and the fields should not be changed as it would hinder the investor’s ability to aggregate information, ultimately defeating the entire purpose of the exercise. The Manager could use the “Comment” section available at the bottom of each tab to give the reader more color regarding the information provided or any assumptions made.
Once we have completed the Open Protocol template, who should we send it to?
It is the manager's decision to whom they want to send the reports. The Open Protocol reports are owned by the manager, so they are free to send them to any party directly, including current and/or prospective investors.
Technical Questions Regarding Manual and Template: Overall
If we report at Grade 2 or 3, should we fill in information at the previous grade, i.e., Grade 1 and 2 also?
Yes, please fill in the relevant information for the preceding grades also. If a manager is reporting at Grade 3 then they should fill information at Grade 1 and 2 as well. Grades 2 and 3 are not an exhaustive list of constituents of the previous grade and thus to avoid any confusion managers should fill in all grades.
Should the same level of granularity (grade 1/grade 2/ grade 3 data) be used across the whole OP report or different levels of granularity are allowed to be used at different sections?
Managers can pick and choose the level of granularity that they are comfortable providing for different sections of the report. For example, managers could provide Equity sector information at Grade 1 but provide Equity region exposure at Grade 3.
For calculating exposure information, should we rely on the methodology prescribed under Appendix I?
The main body of the Manual contains methodology to calculate exposure information for various instruments, for example GP 15 to 17. The methodology in the main document should always take precedence over Appendix I. For example, GP 16 suggests that "All sovereign interest exposure (Section 3) should be reported as US 10-year swap equivalent basis" while Appendix I suggests that "Bond Future: N * NCS * market price of the CTD reference bond". So, for Sovereign bonds, use the methodology prescribed in the main body, i.e., report exposure on US 10-year swap equivalent basis" and for non-Sovereign bonds use the methodology in Appendix I.
How Should Number of Issuers Be Reported?
In all the exposure sections (Equity, Sovereign and Interest Rate, Credit, Convertible Bond, Currency, Real Assets, Digital Assets, and ESG), number of parent company issuers should be provided instead of number of positions (2.3.1, 2.3.2, 3.3.1, 3.3.2, 4.3.1, 4.3.2, 5.3.1, 5.3.2, 6.3.1, 6.3.2, 7.3.1, 7.3.2, 13.3.1, 13.3.2, 14.3.1 and 14.3.2). At the portfolio level, please provide only unique issuers and note that this might result in overall portfolio level numbers being less than the sum of issuers provided in the breakdown.
Portfolio risk measures like VaR which are required under Open Protocol are not relevant for our strategies and we do not calculate them internally. Should we calculate them just for the report?
Managers are encouraged to report sections 8-10, if applicable to their strategy. These metrics are useful for some strategies and provide more color to the investors. For some strategies, for example Distressed Debt, VaR would not be a good measure of risk. We encourage the Managers if they already calculate similar metrics for other reports and it would not take much effort to adjust these measures for OP, to do so.
For the XML file format, is it possible to fill only pertinent tags or do we have to fill all tags including empty or not applicable ones?
Generally, you only have to include the tags for which there are any values. There are only a few tags that are mandatory (e.g. fund name and so on).
Should we report at share class or fund level?
All exposure, AUM and performance information should be at the fund level. Under certain circumstances if the fund has multiple share classes (e.g. Onshore/Offshore share class), with similar exposures, then the manager can choose to provide information at a share class level. If performance (section 1.6) is reported at share class level, then the manager should make a note of the share class information on the 'Fund and Investor Details' tab (section 1.5) and ensure that the most representative (e.g., largest AUM) share class is selected.
Should the classification of derivative instruments be based on the underlying security or the instrument?
In the exposure sections, the classification of derivative instruments (by sector, region, maturity, market cap, credit rating, yield, etc) should be based on the underlying security. This is why a long call option should be reported under “Long Exposure” while a long put option should be reported under “Short Exposure”. The only exceptions are the Instrument and Liquidity sections which should be based on the instrument (2.6, 2.8, 3.7, 4.7, 4.12, 5.6, 5.11, 6.6, 7.6, 7.10, 13.6, 13.7).
Example 1: Equity options should be classified based on the underlying security in sections 2.4, 2.5 and 2.7, and based on the instrument type in sections 2.6 and 2.8.
Example 2: Sovereign bond futures should be classified based on the underlying security in sections 3.4, 3.5 and 3.6. Note that this includes section 3.5 Instruments by Maturity; here the maturity should be the maturity of the underlying bond. Section 3.7 should be based on the instrument type.
Is the Open Protocol sector classification exactly the same as GICS?
The sector breakdown in the OP template is based upon GICS, with the additions of Conglomerates, Broad Market Indices and Other. These are for multi-industry companies, multi-sector indices and any other equity exposures that do not fit in one of the 11 default sectors.
Can you give guidance about the format of different values in the report?
Reporting figures and Rounding: All dollar amounts, like AUM and total exposure, should be rounded to the nearest integer. All other values including percentages should be rounded to one decimal place (unless otherwise stated). Please round half up (any value above or equal to 5 should be rounded up, else round down).
The template requires various types of values to be entered and the following is a rough guide:
a) All % values: should be reported with a percentage sign or as a decimal (max 3). For example, 9.355% holding should be reported as 9.4% or 0.094 but not 9.4.
b) Numerical cells: text should not be entered in a numerical cell, i.e. do not put dashes or ‘n/a’ in any cells. If a cell is not applicable just leave it blank.
c) All AUM numbers: should be reported to the nearest integer. Report the actual amount and do not use any text like “m” or “million” in these fields.
d) In sections 2 to 7, “Total Exposure to ....”: Total long and short dollar exposure for each relevant asset class should be reported at the top of the template in sections 2.1, 3.1, 4.1, 5.1, 6.1 and 7.1.
e) Section 4.8 Price Yield and Spread
184.108.40.206 & 220.127.116.11, metrics for performing debt: should be reported as a percentage or decimal. For example, 11.8% or 0.118. Derivative products should not be included in the calculation. 18.104.22.168 metrics for performing debt (CDS current spread): should be reported in terms of basis points 210 and NOT 2.10% 22.214.171.124, Average $ price (cents per $): Should be reported as cents, for example a $100 bond trading at $40 should be entered as 40. Derivative products should not be included in the calculation.
f) Section 4.10.1, Portfolio Average Maturity: Should be reported as number of years, for example 5.1. Do not add “years” or other text at the end.
g) Section 5.7, Derivative specific information
5.7.1 to 5.7.4: should be reported as a percentage or decimal. For example, 10% or 0.10.
5.7.5: Average Portfolio Bond Market Price: should be reported as a dollar amount. Par value should be assumed to $100. For example, a $1000 bond trading at $1128 should be reported as 112.8. Note: information at Grade 2 under 5.7.5 should be reported as percentage of AUM.
5.7.6: Average Portfolio Delta: should be reported as a percentage or decimal. For example, 80% or 0.80.
5.7.7: Premium over Parity: should be reported as a percentage or decimal. For example, 10% or 0.10.
h) In sections 8 to 11, for “% Long/Short exposure included in calculation”: Values should be reported as a percentage of total AUM and not as a percentage of total long / short exposure.
How does Open Protocol consider Side Pockets?
Exposure from investments under side pockets are investor specific and should not be considered while creating the Open Protocol report. Side pockets are only considered under some parts of Section 1, and here total gross exposure (do not net long and short exposure) under side pockets as percentage of funds’ assets under management should be shown. Side pockets should be included under the following sections only:
• 1.2 Total Firm Assets under Management
• 1.3 Total Fund Assets under Management
• 1.7 Investor Break Down
• 1.8 Investor Liquidity
Please do not include Side Pocket information for the following sections
• 1.6 Performance
• 2 to 7, and 13 Asset Class Exposures
• 8 to 10 Portfolio Level Risk Measures
• 14 ESG Module
• 11 Counterparty
Investments under side pockets should be fairly valued. Valuation for listed securities should be at least daily, while non listed illiquid investments should be valued at least annually, with quarterly being preferred.
If the Open Protocol does not represent our portfolio accurately, can we change the methodology or the template to make the report more representative?
The main objective of the Open Protocol is to ensure investors get consistent information across all their investments, and therefore managers are not permitted to change the methodology or the reporting template. The OP template tries to closely define all the metrics as fairly as possible however the rules could result in a misleading number in which case you can use the "Comments" section to state your concerns. The “Comments” section, which can be found at the bottom of each page, can be used to convey the Managers’ opinions to the reader. The cell number that the comment is referring to should be entered under the “Number” column and then enter the “Comment” section. If the comment is general and not to a specific cell in the template, then leave “Numbers” section blank. Any other footnotes or explanations can also be entered here.
Section 1 - Fund & Investor Details
Section 1.5 - Should we complete this section?
This section is applicable only if a manager chooses to report performance (section 1.6) at the share class level rather than the fund level. The reporting share class should be most representative share class if the fund has multiple share classes. If this section is filled in, then performance will be assumed to be at the RSC level.
Section 1.6 - Where and how should we report performance?
Performance should be reported both Net and Gross. MTD (Month to Date), QTD (Quarter to Date) and YTD (Year to Date) performance should be reported on a non-annualised basis under section 1.6. ITD (Inception to Date) performance should be reported on an annualised basis.
Section 1.6 - How are QTD, YTD and ITD performance calculated?
QTD performance is the cumulative performance to date since the latest quarter end NOT rolling 3month return. Similarly, YTD performance is the cumulative performance since the latest 31st December. ITD performance must be annualised unless the fund is less than 12 months old.
Section 1.7 - Should “Top 5 Largest Investors” include the GP/manager?
Yes. GP/Manager investment should also be included under Individuals.
Section 1.7 – Should we follow the classifications provided in regulatory reporting (i.e. Form PF) or more closely align answers with internal classification systems? Managers should be looking to align their investor reporting with their regulator reporting, within the Open Protocol guidelines. Section 1.7 – Should values be reported for investors or beneficial owners? For example, we may have an investor that is a bank, but the beneficial owners are high net worth individuals. Would this investment be classified under Individuals or Intermediaries?
For Banks, Private Banks, insurance companies and other financial institutions this would be classified based on the underlying source if possible (e.g., to HNW individuals if applicable). For Fund of Funds this should be classified as Intermediaries.
Section 1.8 - How do you complete this?
Please report this section in the same manner as you would in Form PF, Question 50 Form PF (sec.gov). Please report this section assuming that 100% of the investor base has requested liquidity, as the section should be dynamic, and not always equal to terms. For each reporting date, this section should be filled in taking into account all relevant lock-ups, upcoming notice and redemptions dates, gates, etc. “Without Penalty” column should be completed cumulatively such that “More than 36 Months” + “Side Pockets” equals 100%. “With Penalty” column should only show what additional amount can be redeemed with Penalty in each cumulative period. Therefore, the sum of the two numbers across each row should not exceed 100%. The split between “with penalty” and “without penalty” should be proportional to the split between the investor base off lockup (“without penalty”) and investor base under soft lockup (“with penalty”). For example, assume the following:
- 35% of investors are locked up, 50% are off lockup, and 15% are under soft lockup.
- 20% gate applies.
The 20% gate should be split as follows:
- Without penalty: 20% * (50% / (50%+15%)) = 15.4%
- With penalty: 20 *(15% / (50% + 15%)) = 4.6%
Section 1.8 - If investors have already given notice to redeem and redemption is scheduled for end of quarter, should they be ignored or included under 'less than or equal to 3 months'?
They should be included in less than or equal to 3 months because the assets are at risk.
Section 1.9 – How is “Unencumbered Cash” defined?
Report percentage of total AUM held in unencumbered cash. Note that unencumbered investments in money market funds should be included. The PF form definition of unencumbered as well as the Financial Conduct Authority (FCA) handbook definition of near cash can be used as guideline.
PF form: The fund’s cash and cash equivalents plus the value of overnight repos used for liquidity management where the assets purchased are U.S. treasury securities or agency securities minus the sum of the following (without duplication):
(i) cash and cash equivalents transferred to a collateral taker pursuant to a title transfer arrangement; and
(ii) cash and cash equivalents subject to a security interest, lien or other encumbrance (this could include cash and cash equivalents in an account subject to a control agreement).
FCA: money, deposits or investments which, in each case, fall within any of the following:
(a) money which is deposited with an eligible institution or an approved bank in:
(i) a current account; or
(ii) a deposit account, if the money can be withdrawn immediately and without payment of a penalty exceeding seven days' interest calculated at ordinary commercial rates;
(b) certificates of deposit issued by an eligible institution or an approved bank if immediately redeemable at the option of the holder;
(c) government and public securities, if redeemable at the option of the holder or bound to be redeemed within two years;
(d) bills of exchange which are government and public securities;
(e) deposits with a local authority of a kind which fall within paragraph 9 of Part II of the First Schedule to the Trustee Investments Act 1961, and equivalent deposits with any local authority in another EEA State, if the money can be withdrawn immediately and without payment of a penalty as described in (a).
In general, we expect Unencumbered Cash to include only cash, risk free government bonds and money market funds that are in the same currency as the fund. Any cash or cash equivalents that are not in the base currency of the fund must be reported in section 3, sovereign and interest rate exposure, and section 6, currency.
Section 1.9 - For instruments in Currency sections 6.5 and 6.6, is "Cash" included in the section for "Spot"?
Report cash under Unencumbered cash (1.9.1). Under 6.5 and 6.6 please only report actual currency positions that are not in the base currency (USD).
Section 1.9 - Can managers use same number for OP & Form PF (for unencumbered cash)?
Section 1.9 - If we invest excess cash in short duration fixed income securities as a cash management strategy, should this be reported under Unencumbered cash or elsewhere?
If these are risk free securities issued by the government of the currency of the fund, this can be reported under Unencumbered Cash. Otherwise, due to market risk, these investments must be reported on the appropriate asset class tabs (i.e. credit and sovereign interest rate tabs) and should not be reported under Unencumbered Cash).
Section 1.10 - What does "Investment in External Funds" mean?
Any investment in funds where the manager has “no control” over the investment decisions of, should be treated as external. If you are reporting for a fund which invests in other funds within the same company where the manager has control over its investments, then these funds should not be treated as external investments and their exposure and position information should be included in the appropriate exposure tabs. Investments in money market funds should be reported under 1.10.1 and 1.9 (if unencumbered) and investments in any other funds should be reported under 1.10.2.
Sections 1.9 and 1.10.1 - Should there be any overlap between these sections?
Investments in money market funds in the base currency of the fund (if unencumbered) would be reported under both 1.9 and 1.10.1.
Section 2 - Equity Exposure
Overall - How should baskets be reported?
Baskets should be broken down into individual stocks in order to accurately reflect the sector and region exposures in the portfolio, if feasible. This may appear to inflate your total number of issuers in sections 2.4 Sectors and 2.5 Regions however in the Instrument and Market Cap sections you can report each basket as one issuer under “Indices and Baskets”. It would also be acceptable to report baskets in the “Equity (Single Stock)” line in section 2.6 Instruments to distinguish them from listed indices, but in 2.7 they should be bundled under “Indices and Baskets”.
Overall – How should index exposure be reported?
Index exposure should be broken down into sectors, regions, and market cap, where possible. An approximate breakdown is acceptable. In sections 2.6 and 2.7 index exposure would be reported under “Equity Indices” and “Indices and Baskets” respectively.
Overall – How are VIX positions reported?
Since the Open Protocol template does not treat volatility as a separate asset class, VIX positions should be captured in the Equity Exposure tab. For consistency, they should be expressed as a combination of options on the S&P500 which would be captured under the Equity Indices – Options exposure row. For example, a long VIX future position can be expressed as long calls and long puts and then the delta adjusted exposure of the latter would be reported in OP. Alternatively, if the above treatment is not possible, the position could be captured as long or short index future exposure, depending on whether it is a bearish or bullish view on the S&P500. For example, long VIX is a hedge against falling equities hence it would be captured as short exposure in OP.
Section 2.4 – For a sector specific index, for example Materials, would we classify the exposure as Materials or Broad Market Indices. How is this classified at grade 2 or 3?
The exposure should be reported under the specific sector, in this case under Materials in grade 1. If the break down is known, use that to fill in higher grades. This would be an example of where the number of issuers in the higher grades will not sum to the lower grade but that is expected. Note that the same logic should apply to mapping the indices on the region table.
Where should mergers, IPOs be included in the Equity tab with regards to sectors?
Unless it is known that the pool of companies of these trades is focused to a specific sector, they should be categorized under ‘other’ in section ‘2.4 Sectors’ (Ideally, with a comment noting what the exposure refers to).
How should SPACs be reported?
The SPAC should be reported in the equity tab (ideally, with a comment noting what the exposure refers to). Unless the sector is known or the trade is focused to a specific sector, the exposure should be categorized under ‘other’ in section ‘2.4 Sectors’ (Ideally, with a comment noting what the exposure refers to). The argument that SPACs should be reported under Financials does not hold since the underlying is taken into consideration and not SPACs as a financial instrument. It should be noted that, regardless of where the SPAC capital is invested (U.S sovereigns, credit etc.), it still should be reported in the equity tab.
Section 2.6 - What does PIPE stand for?
PIPE stands for Private Investment in Public Equity. Please report Market value if possible.
Section 2.7 – How should private investments be classified with respect to market cap?
Private exposure should be classified under the relevant bucket based on the company valuation.
Section 2.8 – Should CFDs be reported as Exchange Traded or Non Exchange Traded?
CFDs should be classified as non-exchange traded in section 2.8. To explicitly show how much exposure is in CFDs, the grade 2 information in section 2.6 can be completed. You can also add a comment at the bottom of the report to provide further clarification.
Section 2.8: How should pre-IPO securities be classified?
These should be classified as privates and continue to be reported as such for as long as these remain restricted for selling even after the company goes public.
Section 3 - Sovereign & Int Rate Exp
Overall - Which US 10 year swap should be used in the conversion?
We suggest managers to use the DV01 of a theoretical contract on Bloomberg (USSW10 Currency).
Overall - Do we include Sovereign CDS in the Sovereign and Interest Rate Exposure section, or are these captured in the Credit section? If so, what exposure calculation would be used?
Sovereign CDS should be reported in the Sovereign and Interest Rare Exposure section. The exposure information should be the same as other CDS, i.e.. underlying bond equivalent, but the bonds' exposure should be converted to 10-year US Swap equivalent.
Overall - How should defaulted sovereign debt be reported, given that 10-year equivalent exposures cannot be computed? Can market value be used instead?
Yes, given that 10-year equivalent exposures cannot be computed, it is fine to use market value for defaulted sovereign debt, with a note in the comments section.
Under which asset class should TIPS be reported?
These securities should be included in the Sovereign and Interest Rates Exposure section.
How do we report Sovereign and Interest Rate exposure on a 10-year Swap Equivalent Basis?
The basic idea here is to calculate the interest rate exposure in terms of 10-year swaps by using DV01 as the relationship.
- Step 1: Calculate present value of all the bonds in the portfolio
- Step 2: for non-USD bonds, convert to USD.
- Step 3: Calculate DV01 for all the bonds in the portfolio and for the reference 10-year Swap
- Step 4: For each bond in the portfolio calculate the ratio of its DV01 to DV01 of 10-year swap (so bonds with DV01 lower than 10-year swap will have ratio less than 1 and those with higher DV01 will have a multiplier greater than 1)
- Step 5: Multiply ratio in step 4 with present value in step 2 to arrive at the final exposures.
Note that maturity is based on the underlying, not the instrument.
Section 3.1 - Is it necessary to show the number of issuers (on a netted basis) for number of positions in the Sovereign section?
If the positions in the securities have the same maturity, instrument and counterparty, then you can net them.
Section 3.4 - The Region sub-section appears in all sections; however only section 3 has a Euro entry within Europe/Advanced Economies. Why is this?
The Euro has been introduced under the Sovereign and Interest Rate Exposure section to enable reporting of exposure for Euro denominated investments (which wouldn’t be available for other asset classes).
Section 3.5 - Should caps and floors be placed in the category of Fixed Income Futures - Options (Delta Adjusted) or Cash Note - Options (Delta Adjusted)?
These should appear under Fixed Income Futures - Options (Delta Adjusted), as caps and floors are written on synthetics and not the physicals.
Section 3.5 - When should the 10-year equivalent for Sovereign & Interest rate Exposure be used and when should the notional value be used. In GP 16, it is stated that the 10-year swap equivalent positions should be used. However, in Appendix I, under swaps, it states that the NV of underlying asset should be used. So, for an interest rate swap, what should be populated for 126.96.36.199.1?
The appendix should only be used if the main body of the report does not cover the area. So, in this case any other similar case please refer to the main body, i.e. GP 16.
Section 3.6 - What rating should be assigned to Eurodollar futures and swaptions at grade 1?
The rating of the issuer should be used (and if not available, then the rating of the issuer's region). We would expect all Eurodollar instruments to be captured as Investment Grade. Section 3.6 - Should USD IRS be shown on the "Investment Grade" line, "Not Rated" or "Other"? USD IRS would appear under Investment Grade.
Section 3.6 - How should the credit rating for interest rate derivatives be determined?
The rating for the underlying country should be used. If there is no underlying country (e.g., Euribor) then the rating of the issuer should be used.
Can exposures be netted per clearing house rules?
Exposures on the Sovereign and Interest Rates tab may be netted per the clearing house rules. The objective of not allowing netting risk is to see what would happen if one of the counterparties defaults. In this case since the trades are collapsed there is no risk left on the table and therefore this should be reported on a netted basis.
Section 3.6 - How should money market futures in the Credit Rating section on Tab 3 be classified?
Look at the credit rating of the respective countries.
Section 4 - Credit (x Convertible Bonds)
Overall - Does the market value of a bond include accrued interest?
Market value of the bond should include accrued interest as that influences your market exposure.
Overall – For CDS, what is deliverable/representative bond? Could we report present values of fixed payments of CDS considering the survival curve or the notional amount adjusted by default probability or the notional amount?
Every CDS on a single entity has an underlying representative/deliverable bond, which should be used for valuing the CDS. If identifying the underlying bond is difficult (i.e., for an index) then as per GP 17 you can use notional value. Open Protocol always looks at the underlying asset. If an increase in value of the underlying asset leads to a positive return, then the manager is long, if it leads to a negative return then the manager is short. Therefore, a long CDS position is effectively a short bond exposure.
Overall – What is the bond equivalent market value for bonds (e.g., coupon bond, callable bond, convertible bond, etc.)? Bond equivalent simply means the market value of the bonds, so for example, for a corporate bond you would (Market value*Number of bonds)/(Total AUM). Overall – Are credit securities of different maturities adjusted for one standardized maturity like with “Sovereign and Interest Rate” exposure?
No, the 10-year equivalent conversion is only valid for securities which do not carry any direct corporate credit risk. The 10-year equivalent should be used for all securities reported on the Sovereign and Interest Rate tab, and not for securities reported on the Credit (ex. Convertible Bonds) tab.
Overall – Can you provide guidance for reporting of structured products?
4.4 Sectors: Reporting should be based on the underlying loans. If the underlying loans are concentrated to a specific sector (more than 75%) then the whole exposure should be reported under the relevant sector, otherwise, the whole exposure should be reported under Other.
4.5 Region: Reporting should be based on the underlying loans. If the underlying loans are concentrated to a specific region (more than 75%), then the whole exposure should be reported under the relevant geographic region, otherwise, the whole exposure should be reported under Other.
4.6 Credit Type: Funds are encouraged to complete this section at grade 2 thus providing greater transparency on the underlying assets of the pooled products they are invested in.
4.7 Credit Instrument: At grade 1, structured products should be reported under 4.7.4 Structured Products. Funds are encouraged to complete this section at grade 3, thus providing greater transparency on the type and seniority of the pooled products they are invested in.
4.8 Price Yield and Spread: Reporting should be based on the tranches. A tranche should be considered performing if there are cashflows.
4.9 Credit Rating: Reporting should be based on the rating of the tranche.
4.10 Maturity Buckets: Reporting should be based on the duration of the tranche.
4.11 Concentration of Ownership: Reporting should be based on the tranche.
4.12 Instrument Liquidity: Reporting should be based on the tranche.
Section 4.4 – If there is bank loan position with no available sector categorization, should we always place it in ‘conglomerates’, regardless of the size of the firm? When would a position fall into “Other”?
In this case fill in the “Other” section as the sector information is not available. Fill in conglomerates where you cannot classify into any single sector.
Section 4.4 – What sector should be used for CDS on indices?
CDS on non-single sector indices will come under Broad Market Indices, whereas single sector indices would come under the relevant sector.
Section 4.6 - How should all CDS & related products (CDS indexes/tranches/options) be classified?
The group depends on the nature of the underliers. These can be seen at grade II. Typically, CDS indices fall under the Corporate Debt (Indices / Pooled products) category.
Section 4.6 – Where should quasi-sovereign debt be reported under 'Credit Type'?
The classification depends on the underlying risk. For example, if the debt is backed by corporate revenues, it would fall under Corporate Credit (regardless of whether the company is state-owned), if the debt is backed by local government taxation, it would fall under Municipal Bonds, and if the debt is backed by mortgages, it should be Mortgages. If the debt is issued by a government or supranational body, it would fall under the Sovereign tab.
Section 4.8 – How are the metrics at grade 2 calculated?
The denominator used to calculate these metrics should be the gross exposure to credit. Keep the same approach for section 5.7 in 5. Convertible Bond Exposure tab. Please refer to the Open Protocol Manual for details.
Sections 4.8 & 4.10 – What is considered non-performing? Does this refer to the defaulted debt as well as delayed payment?
Non-Performing Debt would include defaulted as well as delayed payments, i.e., where cashflows are uncertain. It would not include derivatives like CDS.
Section 4.8 – How should CDX Index and single name CDS be categorized?
This should be captured as Performing, unless there has been a default event. In table 4.9 the rating of the CDX Index should either be investment Grade or Non Investment Grade depending on the index specifications, rather than 'Not Rated'.
Section 188.8.131.52 – What does Non Performing Debt - Average $ price (cents per $) mean?
The Open Protocol is asking for the weighted average discount at which non performing bonds, i.e. bonds where scheduled interest payments have not been made or where the scheduled interest payments are uncertain, are trading. If you hold a $100 bond trading at $40 then you report 40.
Section 4.9 – What would be classified as Not Rated vs Other?
'Not rated' should include instruments that do not have a rating. 'Other' should be used for indices where rating composition data is not possible to retrieve, for example Credit Index.
Section 4.10 – What is the average maturity based on – is it expected or legal?
The Open Protocol is looking for legal maturity, to ensure objective reporting. Expected maturity would make the reply subjective as different managers could have different expectations for the same security.
Section 4.10 & 4.11 – Which weighted factor should be used to calculate Portfolio Average Maturity and Average Percentage of the total Outstanding Bonds Owned.
Weights are calculated as (bond equivalent market value)/(total AUM). Portfolio Average Maturity should be reported in years, e.g.,18 months would be “1.5”. If for some reason identifying an equivalent bond is not feasible then use the notional exposure.
Section 5 - Convertible Bond Exposure
Overall - Should delta notional or market value be used for convertible bonds?
For convertible bonds please report market value as opposed to delta notional.
Overall - Showing our long convertible bonds on tab 5 and the short equity exposure on tab 2 makes our convert long exposure look extremely long and our equity exposure look shorter than it should. Can these two exposures be netted on the file under converts?
These should not be netted. If you would like to clarify, you could put a note in the Comments section on each tab, but investors are generally aware that these exposures would offset each other.
Section 5.6 - What is the difference between Average Portfolio Delta and the Delta required in the Sensitivities tab?
In the Average Portfolio Delta computation, delta is defined as a ratio (known as the hedge ratio) between the change in convertible bond price and the change in the underlying equity price, (Change in CB price due to small change in equity price)/(small change in equity price). To arrive at the average, the hedge ratio needs to be computed for each bond and then weighted using the bond market value. Average Portfolio Delta would typically lie in the region of 35% to 80%. This gives an estimate of how much the convertible bond portfolio would change in value due to a small shift in equity prices, ∆, by computing: (Average Portfolio Delta) x ∆.
In the sensitivities tab, Convertible delta is defined as a percentage impact on portfolio value: (Change in value of all convertible bonds held by the fund due to a 1% equity increase)/AUM. Note that this number would of course be affected by the exposure in convertibles. Now, to try and connect the two different deltas, suppose we only have one bond with delta (hedge ratio) 0.8. So, for a small shift in the equity, ∆, the price of the bond will move by: 0.8 x ∆.
CB OP Delta = Sum(Delta adjusted convertible bonds exposures)*0.01/ AUM = (CB1*Delta1+CB2*Delta2+…+CBn*Deltan)*0.01/ AUM Where CBi are the notional market values of the convertibles.
Section 5.6.6 - What does "Coupon convertible" stand for?
This is an error; Coupon convertible is basically convertible bonds with coupons and therefore is a repetition as we already have Convertible bonds under 5.6.1.
Section 5.7 – How are the metrics at grade 2 calculated?
The denominator used to calculate these metrics should be the gross exposure to credit. Keep the same approach for section 4.8 in 4. Credit (x Convertible Bonds) tab. Please refer to the Open Protocol Manual for details.
Section 5.10 - How should Ascots be included in the 5.10.1 calculation?
For ASCOTS, since there are no bonds, you do not include them in this particular calculation.
Section 6 - Currency Exposure
Overall - Currency exposure reporting seems to be confusing. Could you explain it in more detail?
In the examples below, it is assumed the base currency is not Euro.
Here we assume the base currency is not EUR. If it were, this position would not be reflected on the currency tab.
Position: Long Philips in Euro and currency exposure is not hedged.
Treatment in Open Protocol:
In the Equity section:
Long 2.4.2 (Industrial)
Long 2.5.5 (Europe)
Long 2.6.1 (Equity (single stock))
Long 2.7.1 (Mega Cap)
Long 2.8.1 (Exchange Traded)
In Currency section
Short 6.4.1 (Base Currency)
Long 6.4.2 (Europe)
Position: Long Philips in Euro and currency exposure hedged.
Treatment in Open Protocol
In the Equity section:
Long 2.4.2 (Industrial)
Long 2.5.5 (Europe)
Long 2.6.1 (Equity (single stock))
Long 2.7.1 (Mega Cap)
Long 2.8.1 (Exchange Traded)
In Currency section
Short 6.4.1 (Base Currency)
Long 6.4.2 (Europe)
Long 6.4.1 (Base Currency)
Short 6.4.2 (Europe)
Short 6.5.1 (G10 Currency)
Short 6.6.1 (Non Exchange Traded)
The rationale for asking for information in this manner is that if the manager has active currency risk, it would be picked up by the long Euro in Example 1, however if the manager then hedges the currency risk, as seen in Example 2, then it will show a net zero exposure to Euro and Base Currency.
An alternative approach which would lead to a similar output would be to calculate the USD currency delta for all the positions (not just the currency positions) in the portfolio with respect to all the currencies. The output could be used to complete section 6.4.
Overall - How should currency hedges be reported?
Currency hedges should be reported as separate trades in the Currency section. Examples in the question above give further clarification. Currency hedges purely for the purpose of maintaining share classes in different currencies should not be reported under Open Protocol.
Overall - How should we treat non-base currency cash balances?
These should be included in 6.4 (and unencumbered cash on tab 1) but not 6.5 or 6.6.
Overall - Should accruals (dividend or coupon) be included as part of the currency exposure?
If a dividend or interest is paid and/or received by the manager and this is denominated in non-base currency, then this should be included in 6.4 but not 6.5 or 6.6. This can be both encumbered and unencumbered cash.
Section 6.4 - What should be included and excluded from the Base Currency row in 6.4?
Row 11 captures the opposite leg of all non-base currency exposures whether these are direct (i.e., through FX instruments) or indirect (i.e., through non base currency denominated securities/derivatives). It should not however include base currency cash/securities/derivatives. To illustrate this with an example, suppose you hold the following and your base currency is USD:
a) Long EUR stock @10% of AUM
b) Short CAD stock @5% of AUM
c) Long USD stock @15% of AUM
d) USD Cash @20% of AUM
c and d would not count towards the Base Currency row.
a) Would be captured as 10% long in the EUR row (row 14) and 10% short the Base Currency row
b) Would be captured as 5% short in the CAD row (r 37) and 5% long in the Base Currency row
Then the totals in rows 7 and 3 should not include the Base Currency row as this does not pose currency risk (it is the base currency).
Section 6.5 - Should we report our base currency exposures in this section?
Only report one leg of the trade under section 6.5. The base currency leg should not be reported under section 6.5 as it is covered under 6.4.1.
Section 6.5 - What are the G10 Currencies?
The G10 currencies are listed in the manual. They are USD, Euro, GBP, CHF, JPY, CAD and SEK. So, there are only 7 currencies.
Section 7 - Real Assets & Commodities Exposure
Overall - Should we report a Gold ETF under the Equities section or the Real Asset Section?
A Gold ETF should be reported under Section 7. Real Assets.
Section 7.9 - Is energy trading through Oil, Gas and Heating Oil derivatives on exchange classified as upstream?
Section 8 - VaR
Overall - For which strategies is VaR not relevant?
For certain strategies, especially those exposed to event risk like Event Driven, Distressed or Risk Arbitrage, and generally strategies involving illiquid instruments, Value at Risk might not be a good measure of risk. For these strategies managers can use their historic returns to calculate Parametric VaR, and not provide its breakdown under section 8.5, 8.6 and 8.7.
Section 8.3 - Should VaR be reported as a positive or negative number?
Overall portfolio VaR, and VaR for each asset class, region and sector, should be reported as positive numbers as percentages of AUM and not in dollar values. For example, report as 3.4% and not $3,000,000. Diversification benefit should be entered as a negative number and should be calculated as Portfolio VaR minus the sum of the separate VaR components of the corresponding section.
Section 8.5.6 - How should VaR be calculated for currency exposure from non-fx instruments, for example foreign equities?
There are two alternative methods:
1. Include the impact of foreign currency movements under the appropriate asset class VaR, and exclude from the Currency VaR line. For example: Use USD returns to compute VaR for foreign equity, i.e. equity VaR incorporates the foreign currency price movements
2. Exclude the impact of foreign currency movements from the asset class VaR, and include separately under Currency VaR For example: Use foreign currency returns to compute VaR for foreign equity positions, and compute separately the VaR from the foreign currency exposure.
Sections 8.5.7, 8.6.7 and 8.7.14 - How do you calculate the diversification benefit?
Diversification benefit should be entered as a negative number and should be calculated as Portfolio VaR minus the sum of the separate VaR components of the corresponding section.
Section 9 - Sensitivity
Overall - Should the change of all underlying factors (e.g., interest rate, credit spread, implied vol) be all interpreted as relative change (percentage) except the calculation of DV01 and CS01 and the change of time (theta)?
Yes, apart from DV01, CS01 and theta, changes should be relative.
Overall – How should non listed equities be treated in the sensitivities tab?
They should be treated as 0 in the beta calculation, given they are not expected to be affected by small changes in broad equity markets. Such exposures should be removed from the total under 9.9. However, they should be included in the delta calculation, which is explicitly defined as the impact of shifting all underlying stocks by 1%.
Should mergers, SPACs, IPOs be included in the tabs 9. Sensitivity and 10. Stress Tests?
No. Based on the rationale that the OP manual’s guidelines are to move everything up and down 10%, this is likely to create an over/understatement of potential P&L for the cash only Merger names as well as for the SPACs that are trading below liquidation value. Regarding Stress Tests, the % Long exposure included in the calculation should exclude the SPACs/mergers/IPOs. Ideally, a relevant comment in the comments section should be provided, something along the lines of the rationale already mentioned i.e., “Cash only Merger names and SPACs exposures have been excluded from the stress tests to avoid over/understatement of potential P&L that are trading below liquidation value”.
Likewise, for Sensitivities, again the exclusion of these exposures from the calculation is recommended to avoid misleading overstatement and a relevant comment addressing the exclusion of the corresponding exposures.
Section 9.2 - Do we still need to consider credit and interest rate related instruments for the delta calculation?
No, since the table has these two asset classes are blacked out for Delta.
Section 9.2 - For delta, should the change in the underlying asset be absolute or relative?
For the purpose of calculating Delta, the underlying asset value should be increased on a relative basis by 1%. So, if the underlying is 50 then the increase value would be 50.5 and not 50.01. All values should be entered as a percentage of AUM.
Section 9.2 - Should gamma have the same interpretation as gamma is the derivative of delta?
All values should be entered as a percentage of AUM. Gamma should be calculated with respect to the Delta and the calculation methodology should be consistent. Therefore for 3. Sovereign & Int Rate Exp, convexity should be on interest rate while for 4. Credit, it should be on credit spread.
Section 9.4 - As denominator (volatility or STD) of Vega is measured as percentage, does it mean 1% added to volatility? For example, vol of SP 500 is 20%. Does it mean 21% after 1% up in volatility?
Relative is with respect to base so 20% will go to 20.2%.
Section 9.6 - For a bond future on US treasury, do we need to report CS01? How about bond futures on other sovereign bonds?
In general, you should calculate CS01 using the underlying bond. The credit spread should be the difference between the asset’s yield and a US treasury yield with the same maturity i.e., 10-year Bund yield – 10-year US treasury yield; 5-year Gilts yield – 5-year US treasury yield.
Section 9.8.5 (Delta) – Are only FX instruments included for the Currency Delta calculation?
Take into account both direct and indirect currency exposure (FX and non FX Instrument). In other words, include the whole exposure reported in section 6.4 of tab 6. Currency Exposure.
Section 10 - Stress Test
Overall - Should the change of all underlying factors (e.g., interest rate, credit spread, implied vol) be all interpreted as relative change (percentage)?
Yes, these should be interpreted as relative.
Should mergers, SPACs, IPOs be included in the tabs 9. Sensitivity and 10. Stress Tests?
No. Based on the rationale that the OP manual’s guidelines are to move everything up and down 10%, this is likely to create an over/understatement of potential P&L for the cash only Merger names as well as for the SPACs that are trading below liquidation value. Regarding Stress Tests, the % Long exposure included in the calculation should exclude the SPACs/mergers/IPOs. Ideally, a relevant comment in the comments section should be provided, something along the lines of the rationale already mentioned i.e. “Cash only Merger names and SPACs exposures have been excluded from the stress tests to avoid over/understatement of potential P&L that are trading below liquidation value”.
Likewise, for Sensitivities, again the exclusion of these exposures from the calculation is recommended so as to avoid misleading overstatement and a relevant comment addressing the exclusion of the corresponding exposures.
Section 10.1 - Should Credit +/-10% include sovereign bonds and sovereign CDS?
Yes. Sovereigns should be included (sovereign credit spreads).
Sections 10.1.3 and 10.1.4 – For the Sovereign Interest Rate stress tests, which key rates should we be shocking for the Short Term +5% and Long Term +10% test?
Short Term refers to any security with maturity which is less than or equal to 1 year. Long Term refers to any security with maturity which is more than 1 year.
Sections 10.1.7 and 10.1.8 - For Convertible Bonds +/- 10%, should we move the underlying equity or the convertible bond?
Over here only consider the increase/decrease in convertible bond prices and not the equity price. The impact of the equity movement on the converts should be reported under 10.1.1 and 10.1.2 and that of implied volatility under 10.1.13 and 10.1.14.
Section 10.2 - Am I supposed to only report for the scenarios that occurred since inception. i.e., the strategy started in 2008, should I run a simulation for scenarios prior to 2008?
The portfolio inception does not really matter as you would be stressing the current positions. Hence the impact could be reported for all scenarios. For all historical stress tests report the performance of the current exposures over the period of the test. For positions on securities that existed during the period of the test, then use their actual historical prices to calculate the impact. For positions on securities that did not exist at the time, use a predictive methodology.
Section 10.3 - For the worst rolling measures, should the negative or positive number be used to present loss for “Worst Rolling 5-day Cumulative Return”?
These numbers should be reported as a negative as there might be a scenario where the worst case is still positive.
Section 11 - Counter Party
Overall - We are concerned about completing the Counterparty section as we believe this information to be sensitive.
We have tried to keep Grade 1 of the Counterparty section as high level and general as possible. We have avoided asking for names of Counterparties and even at Grade 3 there is an option to report anonymous data. Our hope is that this could be completed without the fund having to divulge sensitive information. Part of the reason for including managers in the Working Group for Open Protocol was to ensure that the template would not require the revelation of overly sensitive information.
Overall - Should accrued fees be included in the Counterparty tab?
Yes. Fees and escrow accounts would be reported in section 11.3.3. Other assets. This section can include an adjustment for accruals that will bring the total equity value reported in 11.1 to 11.3 in agreement with the Fund AUM reported in section 1.3. No counterparty relations should be counted for this amount. This amount should not be taken into consideration when filling in other sections within section 11.
Overall - What should be included in the Available Liquidity & Required Margin at Grade 3?
Available Liquidity is meant to capture access to additional financing that is not yet utilised by the manager. Required Margin would be margin for all instruments which require margin, so includes futures, but other derivatives would be included as well.
Overall - How is Equity defined? How is Cash defined at grade 3?
Equity is generally the net value of the account according to audit standards. It should be defined as LMV – abs(SMV) + Cash + OTE / MTM. Cash should include excess margin plus any other cash balance held at the counterparty. Cash used for position collateral should not be included here as this would create a double counting of the position reported under the LMV, SMV or OTE/MTM column.
Overall - In "Required Margin", should the initial margin be included or is it only margin call with respect to CFD which is an OTC derivative?
That would be the margin required to keep the position open at the time of reporting, so in most cases it would be the maintenance margin. If your margin account has more than required, then the excess margin would go under the cash column instead of required margin.
Section 11.1.1 - Should we report ISDA exposures net of collateral?
If the collateral is held at the counterparty, then no. The value of the collateral should show up in the Equity number you provide. If the collateral is held at a third party institution (such as a tri-party account) then it should be reported in the appropriate part of the treasury assets section.
Section 11.1 - Futures Clearing: Party A is the sole entity that we use to clear across all Clearing Houses. Should we report our assets at the clearer level (Party A) or at the Clearing House Level (LCH Clearnet, Eurex Clearing) membership?
In the first part of the counterparty section 11.1 aggregate all the assets under one "Part A". Only report one counterparty, not multiple. However when reporting geography of the counterparty (section 11. 5 to 11.7), then the exposures that are held in different regions would be broken out.
Section 11.1 – Should the total AUM be split into the different asset types in 11.1, 11.2, 11.3?
Yes, the total Equity column should total very close to the overall AUM.
Section 11.1 – 11.3 - How should assets/cash held in a standard bank custody account be classified in Section 11?
They should be classified as a Treasury Asset.
Section 11.1 - Should we report repo trades in this section and if yes, where – is it “11.1 Trading Assets – Other”?
Overnight repos should go under Treasury Assets. Repos with longer maturities should be classed as Trading Assets. Which part of Trading Assets depends on who the financing broker is – if this counterparty doesn’t fit under any of the other headings, eg ISDA, it should go under Other.
Sections 11.1 to 11.3 - Could you please offer some guidance as to how individual segregated accounts for cleared swaps at a clearing houses should be treated?
These fall under Futures Clearing.
Sections 11.1 to 11.3 - Where should money market funds be reported?
The classification depends on whether the assets are invested via a counterparty. If the fund is directly invested in a money market fund then this would be reported under Other - Self Custody. If, for example, excess cash at a prime broker is swept into a money market fund, this may be reported under Trading Assets - Prime Broker.
Section 11.3 - What is an “affiliated entity”?
An affiliated entity is a company which is a counterparty but is affiliated in some way to the Investment Advisory firm.
Section 11.3 – How is 1.3.2 Self Custody defined and how does this differ from 11.3.1 Net exposure to affiliated entities?
Self Custody section would include any holdings of bank debt/loans, trade claims or privates where no custodian is involved in safe keeping these assets. The contracts for these investments can be held at agent banks, administrator etc. No counterparties would be reported in such cases. Value of Self Custody Equity could also include, for example, investments in other funds, works of art, timberlands, etc.
Section 11.3 - How should bank debt, trade claims, and privates be classified?
11.3 should be Self Custody and location of the fund.
Section 11.3 - Where would you classify interest rate swaps and CDX indices which are cleared through ICE and CME clearinghouses?
Include them under 11.1.3 Futures Clearing.
Section 11.4 - Should a counterparty not be in the list, what should be included as the counterparty name?
Please let us know of the names and we will add them to the list. In the meantime, you can use a holding name like Counterparty A and add a comment giving more details.
Section 11.4 - How should negative equity be treated when computing the top trading counterparties?
Sort balances from the largest positive to the largest negative. For example, say you have 4 counterparties with the following equity in each (in millions): 100, 70, -10, 5. In top 3 you would report 100+70+5. The -10 would be included in top 5. The rationale behind this is that a negative balance is owed to the counterparty rather than owed to the fund; thus, there is no risk of losing assets in case the counterparty shuts down. This treatment might lead to top 3 > top 5 > top 10 > total AUM which is acceptable.
Section 11.5 and 11.6 - Trading assets by geography Treasury assets by geography. Why depending on the question are you requesting sometimes the "Number of Custodians / Counterparties" and sometimes the "Number of Financing Agreements"?
Risk under "treasury assets" is focused on who holds the assets and therefore we look for "Number of Custodians / Counterparties" while in the risks under "trading assets" we are interested in the number of active agreements with the counterparties and therefore we look for "Number of Financing Agreements".
Section 11.5-11.7 – How are the assets based on the Geography of where they are held classified?
They are based on Counterparty Location (based on the subsidiary).
Section 11.9.1 - What should be included under "What % of your aggregate net credit counterparty exposure is with unregulated entities?"
This question focuses purely on financing so only report securities that are financed by the unregulated entities (non financial institutions) in this section.
Section 11.9.2 - What should be included under "What % of your financing is uncollateralized?" When the fund buys a corporate loan which is generally fully paid and outside the scope of Prime Brokerage, should this be reported as uncollateralized.
Again, this section is focused on financing and should contain information regarding any unsecured borrowings that the fund might have. Fully funded position would generally be reported in the "Treasury Assets or Other" part of the report depending on how the security is custodied and administered. If a fund establishes a position without borrowing, then the position should not be included in the financing section.