Overview of Transaction Matching

What are unmatched transactions?

• Client-driven or external movements: this is when capital exits or enters the portfolio. For example, a client withdraws cash or transfers securities in.
• Investment-related transactions or internal movements: these are movements within the portfolio between any of its investments (income or trades), cash books and receivables or payables.

Keeping track of these transactions can be complex but this is where V-Wrap’s transaction matching features come into play.

For investment-related transactions, V-Wrap employs a form of double-entry bookkeeping to ensure your portfolios are balanced. These internal movements must be accounted for and matched according to their dates, amounts and transaction types. If not, we have what are referred to as ‘unmatched transactions’ and the portfolio will be out of balance.

Why do we care? Because if your portfolio is out of balance, then your client’s portfolio value and performance figures will not be accurate.

How cash matching works

Cash transactions are usually fed into a cash book as deposits or withdrawals. When a match is performed, the cash book type will be changed from deposit or withdrawal to something more descriptive. So for example, a cash book deposit that matches to a sell will be changed to Stock Sell. When this occurs, the two transactions are said to be matched.

This automatic transaction matching occurs for each portfolio after the overnight recalculation. So it should have occurred by the time you are in the office each morning. The settings used to control which transaction match are on the System Management > Service Maintenance screen.

In this example, a cash deposit would match to a sell transaction if the deposit date and settlement date were within one day of each other and the deposit amount and transaction amount were within two cents of each other.

V-Wrap operates on a cash is king basis; that is, it assumes your cash transaction is accurate, so when the two transactions are matched, the sell transaction will be updated to the same date and amount as the cash deposit.

What transactions are not automatically matched?

V-Wrap’s transaction matching rules engine will cover the majority but not all scenarios. Sometimes a cash transaction might match on amount but occurs on a date that is outside of the cash matching tolerances. This is common for managed fund distributions where the receipt date was not provided to V-Wrap. And there are those unexpected scenarios where a client does something out of your control, such as organise for a term deposit to be paid to a different bank account on maturity, or they make a large cash withdrawal which means there are insufficient funds to settle a trade on the same day.