The details for calculating the K-factor requirements must be entered in tabs I 06.01 to I 06.13. Class 2 investment funds must include these in the IFREP reports on a quarterly basis. Below, we outline the correct calculation and reporting methods and provide a detailed example.
This concerns the following tabs in the IFREP report:
| K-Factor | Tabs |
|---|---|
| K-AUM (assets under management) | I 06.01, I 06.02 |
| K-CMH (client money held) | I 06.03, I 06.04 |
| K-ASA (assets safeguarded and administered) | I 06.05, I 06.06 |
| K-COH (client orders handled) | I 06.07, I 06.08 |
| K-DTF (daily trading flow) | I 06.12, I 06.13 |
When calculating the K-factor requirement and completing these tabs, please note the following two points:
Below, we include an example K-COH calculation to clarify these points: a Q1 report with reference date 31 March 2024. Please note that the same method applies to the other K-factors.
Example: K-COH calculation for Q1 2024 report
Timeline:
|
Month |
Month t-1 |
Month t-2 |
Month t-3 |
Month t-4 |
Month t-5 |
Month t-6 |
Month t-7 |
|---|---|---|---|---|---|---|---|
| March 2024 |
February 2024 |
January 2024 |
December 2023 |
November 2023 |
October 2023 |
September 2024 |
August 2024 |
This means a Q1 report with reference date 31 March 2024 counts backwards from 1 March 2024, as shown in the diagram above. Therefore the amount that must be entered in I 06.08 at month t-3 is the COH on 1 December 2023, etc. However, the values that must be entered on I 06.07 at month t (March 2024) are the weighted averages, taking into account the number of working days in the months for which the moving average is calculated.
Example calculation with figures
Below is a specific example for the K-COH for March 2024. The following fictitious data are relevant:
These months had the following number of working days:
The weighted moving average for month t (March 2024) is calculated as follows:
Therefore:
This amount must be entered in tab I 06.07 for month t. The same value must be entered in tab I 04.00, column 0010, row 0070 or 0080, depending on whether cash instruments or derivatives are involved. The K-factor requirement is then calculated by multiplying this amount by the corresponding coefficient (0.1% for cash instruments and 0.01% for derivatives) and must be reported in column 0020 in the same tab and line.
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