Automated Community Denominator Check

This article covers the following points:

  1. What is Denominator Check?
  2. How does it work?
  3. DC Volume Control
  4. FAQ

 

The FundApps Automated Community Denominator Check (AC/DC) feature increases your confidence in the challenging data points required for accurate shareholding disclosure calculations - removing manual checks from your workflow.

The feature is enabled by opt-in. If you would like to opt-in and have the feature set up in your production environment, please contact your Customer Success Manager.

 

What is a Denominator Check?

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  • Uses the FundApps community to power an automated comparison of denominator values uploaded across the client base.
  • If different values are detected on the same security across clients, then the feature flags to the user in the UI that differences exist.
  • Users can use this information to identify which results may be impacted by potentially incorrect denominator values and prioritise results to investigate.

 

How does it work?

On position file upload Denominator Check compares the uploaded denominator values across all customers who have opted into the feature. Any differences in denominators for the same security (matched by ISIN) are flagged in the UI.

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To simplify investigation our service provides the 'Denominator Discrepancy by Issuer' (DC Issuer) view with the information on the overall number of results affected and variance boundaries.

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Denominator values include:

  • Total Shares Outstanding
  • Total Voting Rights
  • Total Voting Shares
  • Class Shares Outstanding
  • Total Shares in Treasury

* Note that currently, the Denominator Check feature compares only the Total Shares Outstanding and Total Voting Rights field. Other denominators will soon be added.

 

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Examples:

Case 1

Date: 03-12-2018

CustomerA - ISIN: ISIN1 TotalSharesOutstanding: 10001

CustomerB - ISIN: ISIN1 TotalSharesOutstanding: 10050

In this instance, the TotalSharesOutstanding (TSO) value differs across the two customers for the same NavDate. Denominator Check would flag to both customers that 1 other distinct value has been uploaded by other customers.

 

Case 2

Date: 03-12-2018

CustomerA - ISIN: ISIN2 TotalSharesOutstanding: 10001

CustomerB - ISIN: ISIN1 TotalSharesOutstanding: 10050

In this instance, the ISINs do not match between the two customers. There would be no check between the two securities and therefore Denominator Check would not flag anything in the UI.

 

Case 3

Date: 03-12-2018

CustomerA - ISIN: ISIN1 TotalSharesOutstanding: 10050

CustomerB - ISIN: ISIN1 TotalSharesOutstanding: 10050

In this instance, the ISINs match and so too do the two TSO values. Denominator Check would make the comparison and see that values match and therefore not flag anything in the Rapptr UI.

 

Case 4

Date: 03-12-2018

CustomerA - ISIN: ISIN1 TotalSharesOutstanding: 10050

CustomerB - ISIN: ISIN1 TotalSharesOutstanding: 10050

CustomerC - ISIN: ISIN1 TotalSharesOutstanding: 10001

In this instance, three customers hold the same ISIN. Two customers have uploaded the same TSO value and one a different value. In this instance, there are 2 distinct values across the three customers, so each would be notified that 1 other unique value of TSO has been uploaded.

 

DC Volume Control

Some users prefer not to see all denominator variances flagged in the Dashboard & Results screen and wish to be alerted to ones above a certain variance threshold only.   

Admin users can tailor the DC experience via the Denominator Check Volume Control page.

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Denominator Check Volume Control is found under Global Settings in the Setup tab and allows those with admin privileges to set a Variance Threshold between zero and ten percent.

Changing the setting affects DC alerts by excluding denominator variances below the percentage you select in the Dashboard and Results screen. Alerts below this "volume level" will not be shown. 

For convenience, the DC volume setting is applied to all users in your business and everyone can see the DC Volume setting that has been applied.

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The Denominator Discrepancy by Issuer (DC Issuers) screen is unaffected by volume control and is the ideal tool to see all variances irrespective of your volume setting.

Whilst we do hope you will get value from DC Volume Control, we wish to remind users that small denominator variances can have a meaningful impact on results where positions are close to disclosure thresholds. 

For best practice, we would encourage you to make DC Issuers part of your daily operational workflow.

 

FAQ

Q. Which values are compared?

A. Currently only a comparison of Total Shares Outstanding (TSO) and Total Voting Rights (TVR) are supported in the feature.

In the future, the feature may compare:

  • Total Voting Shares
  • Class Shares Outstanding 
  • Total Shares in Treasury

Q. Is it exact values that are compared?

A. Yes. Currently, any integer difference in the denominator value uploaded will be flagged as a difference.

If denominator values are uploaded as fractional, the rounded integer value will be compared.

Q. Over what period are values compared?

A. Values are compared against files uploaded on the same data date and the business day before (values uploaded on day T are compared against other values uploaded on day T and T-1). The reason for this is so that customers uploading first in a data date (e.g APAC region) are able to take advantage of the feature by comparing against reference data uploaded for the day before.

Q. Can I see the number of customers who have different values?

A. No. It is key that the number of customers who uploaded the same security is not revealed. This is why Rapptr will notify of the number of unique values uploaded rather than the number of customers who have uploaded.

Q. What would happen if we supply two instruments that have the same ISIN but a different denominator property (for e.g. two different values for Total Shares Outstanding)?

A. In a case like the above where a client has two different values for Total Shares Outstanding for the same ISIN both are included in the DC. As long as a value is unique to others it will be included regardless of whether a client has already supplied another value for that ISIN.

Q. When can we use this feature?

A. This feature is enabled by opt-in only through confirming with your Client Success Manager.

The feature will currently only be enabled in production environments for live customers so that erroneous values uploaded during implementation/testing do not impact the check results for customers running the feature.

Q. Can I see the average value uploaded?

A. No. We will not share at any point any actual values or derived values from information customers have uploaded - we will only notify that differences exists.

Future plans for the feature may look to give confidence weighting back to the user so they get a sense of the accuracy of the data they have provided when compared to the community.

Q. Should I verify the denominator value for results other than disclosures?
A. Yes! There is a risk that if the value provided in your file is incorrect any non-disclosure result could potentially be a disclosure.

Q. Denominator Discrepancy Results Keep On Changing By Themselves, Why?

A. DC is a community feature. As other data is loaded the most common value is updated. This is turn updates client results regarding the variance change. Users can be confident they have a view on the latest variance results and how their data is impacted.

Q. I’ve implemented an override, why can I now see duplicate values?

A. Please note that the day an override is activated, you will see both the new value you have input and the old value. This is completely normal and is to show you that the values have been changed. As of the next NAV date you run, you will stop seeing the previous value and only the new value will be displayed.

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