TRANSACTION COST CALCULATIONS IN ACCORDANCE WITH THE PRIIPS AND MIFID II REGULATIONS–

To meet regulatory reporting and transparency obligations

As of January 2018, the complex regulatory PRIIPs and MiFID II regulations require the disclosure of “packaged” product information by insurance companies, distributors and asset managers who supply them. The aim is to provide investors with improved understanding and comparability in terms of risks, performance and costs of the products. In this context, different market practices have emerged for the determination of transaction costs. For example, several methods can be used until 2020 for the indicated indirect or implicit transaction costs and are represented by our applications and services.
The full PRIIPs or arrival price method calculates the cost as the difference between the market price for the order task and the execution price.
The estimation or new PRIIPs method, which is valid until 2020, determines the average spreads of associated benchmarks or uses base point tables, which are determined by asset management organisations based on ETFs.

BUT WHAT DOES THIS MEAN FOR INSURANCE COMPANIES AND ASSET MANAGERS?

Basics of the calculation

ESMA demands an aggregated summary of costs and fees in absolute and percentage terms. These should be reported as an average over the last 3 years (ex-ante) or last year (ex-post).

Full PRIIPs approach

The challenge with the full PRIIPs method is to determine the bid-ask spread at the time of the order task or the daily courses over 3 years. In the case of fixed-income securities or derivatives traded as OTC, the determination or derivative of the market price is difficult and cannot be accomplished by a course provider. acarda binds several course providers to this, so that the coverage is optimised in the sense of a waterfall concept.

New PRIIPs approach

The basis of the new PRIIPs method is the automatic allocation of transactions to defined asset classes, or the estimation of turnover for young funds. This is arep in relation to the fund volume or the values provided or extrapolated.

WITH OUR INTELLIGENT AREP PLATTFORM, WE CAN CALCULATE TRANSACTION COSTS IN PARALLEL BY ALL METHODS

It includes the following solutions:

  • Initial analysis and automated calculation of the historical and current transaction costs according to the new PRIIPs, full PRIIPs or hybrid process
  • Access to courses, fair value calculations by leading market data providers
  • Estimation of transaction costs for new products
  • Monitoring as part of a browser-based software as a service solution
  • Provision of a managed service for all processes

Do you have questions regarding the calculation of transaction costs?
We are happy to advise you by phone (+49 69 24 44 88 10) or by email. (info@acarda.de)!